A 50% fall needs a 100% gain: the recovery arithmetic

Losses and gains are not symmetric

If an investment falls 50% and then rises 50%, you do not get back to where you started. ₹100 becomes ₹50, and 50% of ₹50 is ₹25, so you end at ₹75. To get back to ₹100 you need ₹50 to become ₹100, which is a 100% gain.

The rule is simple. If the fall is d per cent, the gain needed to recover is d ÷ (100 − d). Every number below follows from it.

Up to about a 20% fall the gap is modest. Past 40% it widens quickly, and each extra 10 points of loss asks for far more than 10 points of recovery.

What that means in years

How long recovery takes depends on how fast the investment grows afterwards. A rough guide uses the rule of 72: money doubles in about 72 ÷ the yearly return, in years.

• A 50% fall needs a doubling. At an assumed 8% a year that is about 9 years; at 12% it is about 6 years.
• A 20% fall needs a 25% gain, which is a much shorter climb at the same rates.

These are assumptions to show the shape of the problem, not forecasts. Real recoveries are uneven, and some take far longer than the arithmetic suggests because returns do not arrive in a straight line.

Why this belongs in fund selection

Two funds can both return 12% a year over a decade and feel very different to hold. The one that dropped 20% on the way needed a 25% rebound; the one that dropped 50% needed a 100% rebound and asked much more of the investor's patience. Our post on reading max drawdown on a fund page shows where to find the figure, and the screener lets you compare funds on it.

A deep fall is also the point where most people sell. Locking in a 50% loss turns a temporary drawdown into a permanent one, and the recovery then happens without you.

A SIP changes the picture

The table describes a single lump sum. A SIP keeps adding money while prices are low, so each instalment buys more units. That means a SIP portfolio can get back to the total amount invested before the fund's NAV returns to its old high. Our post on whether to stop a SIP in a market crash walks through that effect, and the SIP calculator models the steady case.

How to use the numbers

• When you see a fall quoted, convert it: ask what gain is needed to get back.
• Compare a fund's worst fall with the fall you could stomach without selling. If a 50% drop would make you sell, the 100% rebound was never available to you.
• Match risk to the time you have. Money needed in two years cannot wait for a nine-year recovery, a point developed in our post on asset allocation by age.

This post is educational, not financial advice. The recovery times use assumed growth rates for illustration; actual returns vary and can be negative.