Financial Calculators
Loss Recovery Calculator
Down 30% needs up 43%. Down 50% needs up 100%. Losses are not symmetric.
Gain needed just to get back to even
42.86%
- Years to recover at 12%
- 3.15 yrs
Losses and gains are not symmetric: a 50% fall needs a 100% rise. This is the arithmetic behind diversification and behind keeping money you need soon out of equity. It is also why continuing a SIP through a fall shortens the recovery, since new units are bought cheaper.
These figures are for illustrative purposes only and are not investment advice. Please consult your investment adviser for investment related advice.
Why the downside deserves more respect
Gains and losses are measured from different bases. Lose half of a hundred and you have fifty; to get back to a hundred you must double. The bigger the fall, the disproportionately bigger the recovery it demands, which is the mathematical reason large drawdowns are so damaging and why avoiding them matters more than chasing gains.
The calculator shows the gain required for any fall and the years it takes at a given return. It is the arithmetic behind diversification, behind keeping short-term money out of equity, and behind continuing a SIP through a fall, since new units bought cheaply shorten the recovery.
Recovery is measured from the bottom
Gain needed = 1 / (1 - loss) - 1\nYears to recover = ln(1 / (1 - loss)) / ln(1 + return)Worked example: a 30% fall needs a 42.86% gain to get back to the starting value. At a 12% annual return that takes about 3.15 years. A 10% fall needs 11.11%; a 50% fall needs 100%.
Frequently asked questions
Does this mean I should sell before a fall?
It means you should not hold money you need soon in assets that can fall this much. Predicting falls is not possible; sizing exposure to what you can wait out is.
Do SIPs recover faster?
Yes. A lumpsum must wait for the price to return; a SIP keeps buying at the lower price, so its average cost falls and it is back in profit before the market is back to its old high.
How long have Indian equity drawdowns lasted?
The 2008 fall of about 60% took roughly six years for the index to recover; the 2020 fall of about 38% recovered within a year. Diversified funds and SIPs recovered sooner in both cases.
What does this say about leverage?
That it is dangerous. A 50% fall on a portfolio bought with 50% borrowed money is a 100% loss of your own capital, with nothing left to recover with.
Avoid the big loss. The rest follows.
We build portfolios sized so a bad year is survivable, and keep clients invested through it.