A loss is always harder to recover than a same-size gain. If $100,000 falls to $50,000 (−50%), getting back to $100,000 means that $50,000 has to earn another $50,000 (+100%). This asymmetry is simple arithmetic, but it's the real mechanism that erodes the long-term returns of volatile assets — and it's the key criterion when you decide on a loss limit.
To recover an x% loss back to break-even, the required return y is:
When x is small, y ≈ x, so they're nearly the same — but as x grows, y explodes.
| Loss (x) | Return to break even (y) | Multiple (y / x) |
|---|---|---|
| −10% | +11.1% | 1.11× |
| −20% | +25% | 1.25× |
| −30% | +42.9% | 1.43× |
| −50% | +100% | 2.00× |
| −70% | +233% | 3.33× |
| −90% | +900% | 10.0× |
It's the asymmetry of multiplication. Going from $1,000,000 to $500,000 is a ×0.5 multiplication. Going from $500,000 back to $1,000,000 is a ×2 multiplication. The two multiplications have to combine to 1 for you to break even. The partner of 1/2 is 2 — that is, +100% (= 2×) is the break-even counterpart of −50%.
By the same principle:
When the depth of the loss doubles, the required recovery return doesn't simply double — it grows by more than that. Between single-digit-% losses the two sides are nearly symmetric, but past 30% the asymmetry widens rapidly.
Historical cases of how long it took to get back to break-even after a big decline — based on the US S&P 500:
| Period | Max drawdown (MDD) | Time to break even |
|---|---|---|
| 1929 Great Depression | −86% | ~25 years |
| 1973–74 oil shock | −48% | ~7.5 years |
| 2000 dot-com bubble | −49% | ~7 years |
| 2008 financial crisis | −57% | ~4 years |
| 2020 COVID | −34% | ~5 months |
| 2022 inflation/rates | −25% | ~1.5 years |
Because the required recovery return is larger, as long as the market recovers at its average pace, the time also stretches asymmetrically. The deeper the decline, the more of your life you spend recovering.
This asymmetry is exactly the answer to "why should I decide to cut at −10% or −20%." If you cut at −10%, you only need an 11.1% recovery to break even. But if you let it fall to −50%, recovery now requires +100%.
Especially for volatile holdings such as individual stocks or leveraged assets, if no limit is set:
Setting a limit (stop-loss) is an individual-stock / short-term-trading perspective. For a broad market index ETF, even a −30% MDD is almost guaranteed to recover over the long run, so diversification and steady contributions are more effective than a stop-loss. Don't treat the two strategies as the same tool.
Multifolios offers per-holding price alerts (priceAlert). Two thresholds:
If you set the below threshold at the time you buy, then during a market crash a preset limit sends you an alert instead of an emotional decision. If you set the limit using this article's asymmetry table:
Recovery return y = x / (1 − x). The deeper the loss, the more asymmetrically hard the recovery. A limit isn't a function of "the loss depth you can tolerate" but of "the recovery time you can tolerate."