Recovery Tool · Drawdown Scenarios

Drawdown Recovery Scenarios

Quantify how much return is needed to climb back from a drawdown. Compare fast, steady, and patient recovery paths with simple compounding math.

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Back to Drawdown Test → Read: Drawdown Risk Open Risk Glossary
Behavioral risk cluster: Rebalancing Planner Drawdown Test Drawdown Recovery Drawdown Capacity Drawdown Risk Guide Market Pendulum
Glossary → Tool → Support: Risk Glossary Drawdown Recovery Support & Education
Local-only: inputs and feedback are saved with rm_* keys in localStorage. Educational only; ignores cash flows, fees, taxes, and path dependence.

Methodology, references, & disclaimer

How recovery math is calculated, plus what it excludes.

Methodology
Recovery gain = (1 / (1 - drawdown)) - 1. Annualized return for N years = (1 / (1 - drawdown))^(1/N) - 1.
References
Definitions: Drawdown, Recovery time, Risk asymmetry. Context: Drawdown Risk Guide and Drawdown Test. All calculations run locally in your browser.
Disclaimer
Educational only. Ignores cash flows, volatility, fees, taxes, and sequencing effects.

How to use

A quick workflow to pressure-test recovery expectations.

1) Pick a realistic drawdown
Start with your tolerance band in the Drawdown Test, then mirror that drawdown here.
2) Compare time horizons
Check 1-, 3-, and 5-year recovery paths to see which targets feel plausible for your assets.
3) Turn math into limits
If recovery requires extreme returns, tighten risk or use Drawdown Capacity to resize positions.

Guardrails

What this tool is — and is not — designed to do.

Math, not forecasts
Outputs are compounding math only; they are not predictions or promises.
Simplified assumptions
Ignores cash flows, fees, taxes, volatility drag, and sequence effects.
Compounding only
Monthly and annualized rates are compounded, not simple averages.
Use with other tools
Pair with Drawdown Test and the Rebalancing Planner for practical limits.

Example scenarios

Compounded returns only; ignores cash flows, fees, and taxes.

20% drawdown · $250k

  • Loss from peak: $50,000 → after drawdown: $200,000
  • Gain needed to break even: +25.0%
  • Fast (1y): +25.0% annualized · +1.9% monthly
  • Steady (3y): +7.7% annualized · +0.6% monthly
  • Patient (5y): +4.6% annualized · +0.4% monthly

35% drawdown · $120k

  • Loss from peak: $42,000 → after drawdown: $78,000
  • Gain needed to break even: +53.8%
  • Fast (1y): +53.8% annualized · +3.7% monthly
  • Steady (3y): +15.4% annualized · +1.2% monthly
  • Patient (5y): +9.0% annualized · +0.7% monthly

50% drawdown · $80k

  • Loss from peak: $40,000 → after drawdown: $40,000
  • Gain needed to break even: +100.0%
  • Fast (1y): +100.0% annualized · +5.9% monthly
  • Steady (3y): +26.0% annualized · +1.9% monthly
  • Patient (5y): +14.9% annualized · +1.2% monthly
Edge cases: Portfolio size is optional — set it to 0 to hide dollar gaps while rates still calculate. Extreme drawdowns (≥99%) hide recovery outputs; treat them as effectively non-recoverable when planning.

Recovery math, scaled

Pick a drawdown, then compare recovery horizons.

Peak-to-trough decline you want to recover.
Used to show the dollar gap to recover.
Loss from peak
—
Value after drawdown
—
Gain needed to recover
—

Recover in 1 year (fast)

Annualized return needed
—
Approx monthly return (compounded)
—

Recover in 3 years (steady)

Annualized return needed
—
Approx monthly return (compounded)
—

Recover in 5 years (patient)

Annualized return needed
—
Approx monthly return (compounded)
—
Limitations: Compounded returns only; ignores cash flows, fees, taxes, volatility drag, and path effects. Dollar gaps hide when portfolio size is blank or 0. If recovery math implies doubling just to break even, tighten risk or position size.

Next tool

Turn recovery expectations into rebalancing rules.

Next: Rebalancing Planner → Back: Drawdown Test

Learning journey

Move from drawdown limits to cycle awareness, then to rebalancing rules.

1. Drawdown baseline 2. Market Pendulum 3. Rebalancing Planner

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