Unit 1 · Level 2 · What risk really is
Living through −30%
In 2008-09 the S&P 500 fell about 57% from its peak. €100,000 became roughly €43,000 on the statement. For people who held on, it recovered and went far beyond. A drawdown is the distance from the last peak to the current trough, and stocks serve up a −30% roughly once a decade. The maths of climbing back out is crueller than most people expect.
Free to play. No ads, no token, no account needed to start.
What you get asked
Your portfolio falls 20%, from €10,000 to €8,000. What percentage GAIN do you now need just to get back to €10,000?
You need €2,000 of growth on a base of €8,000, which is 25%, not 20%. Losses and gains aren't symmetric, because the recovery starts from a smaller base.
Match each drawdown to the gain needed to break even
The hole gets deeper faster than it looks: lose half, you must double; lose 90%, you must 10x. This asymmetry is why avoiding catastrophic losses beats chasing spectacular gains.
A 50% fall needs a ___ gain just to get back to even.
Halved money must double to recover. The 1% rule from the Trading course exists for exactly this reason: small losses are cheap to repair, big ones are brutal.
Why do investors say a −50% loss is far MORE than twice as bad as a −25% loss?
−25% needs +33% to heal; −50% needs +100%. The recovery burden roughly triples while the loss merely doubles, so depth is disproportionately expensive.
What best prepares you to survive a −30% year with your plan intact?
You can't dodge drawdowns, but you can pre-decide your response and keep near-term money out of the storm. The investor who expects −30% treats it as weather; the one who doesn't treats it as an emergency. 🐜
The rest of this unit
Swings, crashes, and stomachs: telling temporary pain from permanent damage.