Mental model
Risk management Drawdownrecovery
Lose 20% and you need +25% to break even. Loss and recovery aren't a symmetric game — enter your drawdown and see the math.
The asymmetry
Say you start with €10,000 and lose 50% — you're at €5,000. To be back at €10,000 that €5,000 must double: that's +100%, not +50%. That's the mathematical brutality of drawdowns.
Practical consequence: loss avoidance is worth more than gain maximisation. A portfolio that does 15% per year and never exceeds 10% drawdown beats one that does 25% with -40% drawdowns over any multi-year horizon.
This is why risk-management gurus (Dalio, PTJ, Livermore) write obsessively about drawdown limits. Not because they're risk-averse — because they've seen the math.