How to Use the Max Drawdown & Recovery Calculator
Maximum drawdown (MDD) is a risk measure showing how far an asset has fallen from its peak to its lowest point. This calculator takes the peak and trough values of your portfolio and computes both the MDD and the return you'd need from the trough to get back to your original peak.
The drop and the recovery percentages differ because they're measured against different starting amounts. If a portfolio falls 50% from its peak (MDD -50%), it needs a 100% gain — not 50% — from the reduced trough value to get back to even. The bigger the drop, the more dramatically this asymmetry grows.
This asymmetry is exactly why avoiding large losses matters as much as chasing gains in investing. Strategies or assets with a larger MDD tend to be harder to hold through psychologically and take longer to recover from, so it's worth matching your asset allocation to a drawdown level you can actually tolerate for your time horizon.
Frequently Asked Questions
The drop and the recovery are measured against different bases. A -50% drop is calculated from the peak, but recovering is calculated from the already-reduced trough value, which requires a larger percentage gain. This asymmetry grows sharply as the loss gets bigger.
Not necessarily, but a large MDD is psychologically hard to sit through and requires an exponentially larger return to recover, so it matters for risk management. Check whether the typical MDD of an investment fits your time horizon and tolerance for loss.