Journal / Essay · 3 min read
A 34% loss needs a 51% gain. Buy and hold rarely mentions that.
The arithmetic of losses: how much gain a portfolio needs to recover from a drawdown, and why depth of drawdown matters as much as return.
By Lowdraft. Published October 20, 2026.
If a portfolio loses 10%, it needs a gain of about 11% to get back to even. If it loses 34%, it needs about 51%. The deeper the hole, the steeper the climb, and the climb takes time.
| Loss | Gain needed to recover |
|---|---|
| −10% | +11.1% |
| −20% | +25.0% |
| −50% | +100.0% |
The formula is simple: gain needed = loss ÷ (1 − loss). A 50% loss needs a 100% gain, which means doubling just to get back to where you started.
Why this matters more than the headline return
A drawdown is not just a number on a chart. It is the stretch of time when you see your balance below where it was, and wonder if you should stay. Plans that cut the depth of the fall shorten that stretch, and make it easier to stay with the plan.
That is why we rank Keels on the Ulcer Index and UPI, which account for how deep and how long the drops last, and not only on return. It is also why the name of this product is what it is: draft is how deep a hull sits in the water.
The honest trade-off
Cutting drawdowns can cost return in strong, steady rallies, because defensive moves can leave you out of the market when it rises. You give up some upside to shrink the worst case. Whether that trade suits you is your decision.
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Arithmetic illustration with hypothetical figures from a back-test. Not investment advice. Past performance, real or simulated, does not predict future results. You can lose money.