Drawdown and recovery explained: why a 50 percent fall needs a 100 percent rise
A drawdown is the decline from a previous peak to a later low, measured in percent of the peak. The rise needed to get back is larger than the fall: after a 50 percent fall the value must double, a rise of 100 percent, to return to the old peak. This guide explains the arithmetic, depth against recovery time, and what a drawdown figure does not say.
Updated 21.10.2026
What a drawdown is
A drawdown starts at a peak, the highest value reached so far, and ends at the lowest value after it, before a new peak. Its size is the fall as a share of the peak: from 200 to 150 is a drawdown of 25 percent.
It is measured against the portfolio's own highest point, not against its start or the market. Maximum drawdown is the deepest such fall in a chosen period; current drawdown is how far below its peak a portfolio is today.
Why recovery needs a bigger rise than the fall
A fall is measured against the peak, but the rise back is measured against the lower value left after it. That base is smaller, so the same percentage does not undo itself. A 50 percent fall leaves half of the money, and getting back means doubling it, a rise of 100 percent. The rise needed is the fall divided by what remains of the peak.
The table shows common falls. It is arithmetic, not a forecast: it says how large a gain must be to cancel a loss, not that the gain will come or when.
| Fall from the peak | Rise needed to return |
|---|---|
| 10 percent | about 11 percent |
| 20 percent | 25 percent |
| 33 percent | about 50 percent |
| 50 percent | 100 percent |
| 75 percent | 300 percent |
Maximum drawdown and a period's return
The return of a period compares the end with the start; maximum drawdown looks at the worst fall on the way. Two portfolios can end a year with the same return after very different journeys, one drifting upward, the other falling by a third in spring and recovering by autumn.
A longer window can only keep or deepen the maximum, so compare figures over the same dates.
Time to recover is a separate measure
Depth says how far a portfolio fell. Time to recover says how long it took from the low back to the old peak. Two falls of the same depth can last very differently.
Neither can be predicted. Past recoveries took very different times, and a fall can continue after any point that looks like a bottom: a low is known only afterwards.
Why the depth depends on the mix
How deep a fall is depends on what the portfolio contains when it comes. Assets that swing more, such as stocks, usually fall further in a downturn than steadier ones such as short-term bonds or cash, so a mix with more in the volatile assets has a deeper drawdown for the same market move. A mix that drifted toward more risk than planned falls deeper than the plan expected; the guide on rebalancing explains the drift.
Diversification does not remove drawdowns. Spreading money over assets that do not all fall together can make a fall shallower, but in a broad downturn many fall at once.
What a drawdown figure does not say
- Not a forecast: a past fall says nothing about the next one.
- Not a timing signal: no figure shows that a low has been reached.
- Not the worst possible: a deeper fall than any seen can come.
- Not one person's experience: deposits, withdrawals and purchase dates change it.
What Allocaria shows
The Crisis page shows a market stress index whose signals include drawdown velocity, the depth and speed of the current decline from recent highs. It describes conditions and is not a forecast.
For a signed-in account with a portfolio, the page that compares it with an index fund shows the worst drop (the deepest fall from a peak to a low), how far below its peak the portfolio is today and the longest time it spent under a peak, each next to the index fund's where there is enough history, plus a chart of the drops from the peak.
A crisis test on the same page replays today's weights through past crises, from each market peak to its trough. Holdings that did not exist then are left out; when less than half of today's portfolio existed, no figure is shown. It is the past of today's mix, not a forecast.
Common questions
A drawdown is the fall from a previous peak to a later low, as a percentage of the peak. Maximum drawdown is the deepest one in a chosen period.
The fall is measured against the peak, the rise against the lower value left. After a 50 percent fall half of the money remains, and doubling it is a rise of 100 percent.
There is no fixed time and none can be predicted. It differs between falls of the same depth and is known only afterwards.
No. It can make a fall shallower, but in a broad downturn many assets fall at once, so a diversified portfolio still has drawdowns.
Yes, for a portfolio that has been added: the worst drop, the distance below the peak and the longest time under a peak, next to an index fund's, and a replay of past crises. None of it is a forecast.
In Allocaria
The Crisis page: market stress signals, including drawdown velocity →
The rest lives in your own account: see it next to your own holdings.
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General information, not investment, tax or legal advice, and not a recommendation about any security. Allocaria is a decision-support tool; it places no orders and holds no money.