Why this matters for beginners
Recovery math explains why limiting big losses matters so much. This is general education, not personal advice.
Main explanation
Start with a fictional €1,000 investment.
A 20% loss leaves €800. To get back to €1,000 you need €200 more, which is 25% of €800.
A 50% loss leaves €500. You now need €500 more, which is 100% of €500.
The gain is measured from a smaller starting amount, so the percentage needed is always larger than the loss.
Required recovery = loss ÷ (1 − loss). The deeper the loss, the faster this number grows.
Example using a real company
€1,000 down 50% is €500. Gaining 50% only brings it to €750.
- →−10% → €900, needs +11.1%.
- →−30% → €700, needs +42.9%.
Common beginner mistakes
- ✕Thinking a 30% loss is undone by a 30% gain.
- ✕Underestimating how long deep losses can take to recover.
Key terms
- Recovery gain
- The percentage rise needed to return to the original value after a loss.
Key takeaways
- 01Losses and gains of the same percentage don't cancel out.
- 02Deep losses need much larger gains to recover.
Check yourself
- 01€1,000 falls 20%. What gain gets you back to €1,000?
- 02€1,000 falls 50%. What gain gets you back?
- 03Why don't a 50% loss and a 50% gain cancel out?
Apply this in the Analyzer
Try the concept on a real company
When you look at a company's past price swings, think about how much recovery each fall required.
Educational examples only. Not buy or sell recommendations.