How it works
After a fall, your money has to grow from a smaller base, so the percentage gain needed to get back to where you started is always bigger than the percentage you lost.
Gain needed = loss ÷ (1 − loss)
with both written as decimals. A 25% loss needs 0.25 ÷ 0.75 = 0.333, a 33.3% gain.
The calculator also estimates how many years recovery would take if your money then grew at a steady yearly return, using:
Years = log(1 ÷ (1 − loss)) ÷ log(1 + yearly return)
Worked example
Worked example: A 40% fall
A portfolio worth ₹2,00,000 falls 40%.
| Value after the fall: ₹2,00,000 × 0.60 | ₹1,20,000 |
|---|---|
| Gain needed: 0.40 ÷ 0.60 | 66.7% |
| At 12% a year, years to recover | about 4.5 |
A 40% fall followed by a 40% rise leaves you at ₹1,68,000, still 16% below the start. The deeper the loss, the faster the required gain climbs: a 75% loss needs 300%, and a 90% loss needs 900%.
Limitations
- Real recoveries are not steady. Markets can fall further before they recover, or recover in sudden jumps. The years figure is a rough illustration only.
- Not every investment recovers. Broad markets have recovered from past falls, but individual shares sometimes never return to their old prices.
- Costs, taxes and inflation are ignored.
The point of this calculator is not to predict a recovery. It is to show why avoiding very large losses, through diversification and by not borrowing to invest, matters so much. See the risks of investing in shares.