Weekend Special: What It Takes to Recover from a Portfolio Drawdown

After a volatile week, a portfolio review can easily turn into a search for the next winning trade. This weekend, start with a smaller question: if your investments fall, what percentage gain would restore their previous value? The arithmetic is simple, but it changes how a loss looks on a spreadsheet.

In a November 7 MarketWatch opinion column, Brett Arends raised concerns about AI and technology concentration in the S&P 500. That is an argument about exposure, not a forecast we can validate. Rather than treating a headline as a trading instruction, use it as a prompt to test your own assumptions.

1. A loss and its recovery use different bases

Imagine a hypothetical portfolio worth $100,000 that falls 20%, with no cash flows. It is now worth $80,000. A 20% gain on that smaller balance adds $16,000, leaving $96,000. Returning to $100,000 requires a 25% gain instead.

For a loss expressed as a positive decimal, the recovery formula is loss divided by one minus loss. A 10% decline requires approximately 11.11%; a 30% decline requires 42.86%; and a 50% decline requires 100%. These are mathematical relationships, not expected returns or estimates of how long recovery will take.

2. Make a copyable scenario table

Open a blank Google Sheet. Put a hypothetical starting value of 100000 in A2 and a positive loss assumption of 20% in B2. Add the following formulas, with C2 representing the value after the assumed decline, D2 the required recovery gain, and E2 the value after that gain:

C2: =A2*(1-B2)
D2: =1/(1-B2)-1
E2: =C2*(1+D2)

Enter only the expression after each cell label. Format B2 and D2 as percentages and the other cells as currency. Use loss inputs from 0% up to, but excluding, 100%; a complete loss has no finite percentage recovery from a zero base. Copy the row for several assumptions and label the entire table “hypothetical scenarios.”

The table should return $80,000, 25%, and $100,000 for the example. It deliberately excludes taxes, fees, distributions, and cash movements. Changing the loss assumption is a sensitivity exercise; it does not make that outcome likely.

3. Keep account recovery separate from investment recovery

Suppose you add $20,000 after that hypothetical decline. The account balance returns to $100,000, but the original investments have not recovered their loss. Conversely, a withdrawal can reduce an account balance even when its investments rise.

Keep deposits and withdrawals in a separate dated ledger. When comparing actual investment performance across periods with cash flows, choose an appropriate time-weighted or money-weighted return method rather than dividing two balances. This simple scenario table is not a substitute for either calculation.

Also define the reference point. A fall from your latest deposit-inclusive balance, a decline from a consistently measured peak, and an unrealized loss against purchase cost are different quantities. Do not label all three “drawdown.” A historical drawdown series needs consistent valuations and a clear treatment of external cash flows.

4. Connect current holdings without inventing a history

InvestSheet can bring connected holding values into your Google Sheet with =IVS_BROKERAGE("value"). For a brokerage-specific view, use =IVS_BROKERAGE("value", "", "Fidelity"). Check that the filter matches your connected brokerage name and that the accounts you intend to include are covered.

Refresh the add-on and record the valuation date before saving a snapshot as values. Formula cells read stored holdings data rather than a streaming exchange feed. Reconcile missing accounts and separately recorded cash before treating a total as your complete portfolio.

InvestSheet does not supply a historical drawdown attribute. Its unrealized gain or loss is measured against cost basis, so it cannot reconstruct a previous portfolio peak. Start a dated snapshot record if you lack one; leave earlier observations unknown instead of filling them with assumptions.

5. Leave yourself a useful Monday note

Save three things: the reference value you chose, the cash flows excluded from performance, and the assumptions you want to revisit. Keep near-term spending needs separate from a recovery scenario. No spreadsheet can tell you when a market will regain a prior level.

Begin with our free manual holdings template, then add the scenario table in a separate tab. The weekend goal is a record you can explain and update, with calculations that stay useful even when the next headline changes.

Build your next review in Google Sheets

Bring connected brokerage holdings into Google Sheets with InvestSheet, then build your own review around value, cost basis, and unrealized gains or losses. Refresh and reconcile your inputs before comparing accounts or making decisions.