How much gain does it take to undo a loss?
Losses and gains are not symmetrical. Losing half of a balance requires a doubling to recover it; losing ninety percent requires a tenfold. Promoters quote the smooth months and never the drawdown, so this is the number to ask about.
Enter the numbers
Losses are not symmetric
The bigger the drawdown, the more the remaining money has to do. A strategy that promises a small steady return but can lose half the balance once needs a doubling just to break even.
| Loss | Gain to break even |
|---|---|
| -10% | +11% |
| -25% | +33% |
| -50% | +100% |
| -75% | +300% |
| -90% | +900% |
| -99% | +9,900% |
This is the asymmetry that return traps rely on: the loss is advertised as a risk, never as the arithmetic it becomes.
Gain needed = 1 / (1 - loss) - 1.
The red line
A guaranteed return higher than a Treasury bill or an insured deposit cannot exist. Every dollar paid above the risk-free rate is paid for with risk, leverage, or other people's deposits. A published promise of a fixed return above the risk-free rate is the definition of a return trap.
Reading the result
- This is pure arithmetic on the balance, not a comment on any particular strategy. It applies to an index fund, a leveraged position and a scheme's 'temporary withdrawal pause' alike.
- The tool also explains why a strategy that can lose everything cannot be rescued by any subsequent return: once the balance is zero, the required gain is infinite.
Questions this calculator answers
- Why does a 50% loss need a 100% gain?A balance of 100 that falls to 50 has to earn 50 to return to 100. That 50 is 100% of the remaining balance, even though it is 50% of the original.
- Is a drawdown of 90% survivable?Only if the investor adds money or the strategy produces ten times the remaining balance. Both are possible in the abstract and neither is a plan.
- Does this calculator argue against risk?No. It states the arithmetic of risk so that a promise of steady returns can be tested against what a single bad month actually does to the balance.
These are arithmetic tools, not investment advice, and no calculator can tell you whether a particular operator is honest. What the arithmetic does show is whether the advertised return could come from a supervised product at all. To see the returns that are being promised in the wild, read the register, or the method and math page for how entries are built.