Measure the largest peak-to-trough fall and the gain required to recover from it.
A 30% fall requires a 43% gain to recover, because the gain is measured against the reduced value. That asymmetry is why avoiding large drawdowns matters more than capturing every upswing. Maximum drawdown is the risk measure investors actually respond to, and the recovery asymmetry is what makes deep losses so costly in time.
Maximum Drawdown
Drawdown = (peak − trough) ÷ peak; recovery gain = (peak − trough) ÷ trough
Drawdown = (peak − trough) ÷ peak; recovery gain = (peak − trough) ÷ trough A 30% fall requires a 43% gain to recover, because the gain is measured against the reduced value. That asymmetry is why avoiding large drawdowns matters more than capturing every upswing.
Maximum drawdown is the risk measure investors actually respond to, and the recovery asymmetry is what makes deep losses so costly in time.
This calculator takes 4 inputs: Peak portfolio value, Trough portfolio value, Current portfolio value, Expected annual return. The pre-filled defaults are a realistic starting point — replace them with figures from your own environment for a result you can act on.