Final Return Hides the Journey
A positive start-to-end return does not mean the path was easy. A portfolio may have fallen 50% before recovering. Maximum drawdown measures the largest loss from a previous peak.
Recovery Mathematics
After a 50% loss, returning to the starting value requires a 100% gain, not 50%. Required recovery rises disproportionately with the loss. Avoiding a forced sale during that period is critical.
Horizon and Risk Capacity
Money needed for a home deposit in five years cannot carry the same volatility as retirement money needed in thirty. Risk tolerance is emotional comfort; risk capacity is the financial ability to bear loss.
Stress Test
- Apply the worst historical drawdown to the current portfolio amount
- Consider failure to recover before the goal date
- Separate emergency funds from volatile assets
- Compare rolling one-, three-, five- and ten-year windows
How Should You Use the Result?
This analysis is designed to make assumptions visible and reproducible, not to declare one universal winner. Change the amount, start date, currency and contribution frequency in the calculator to see how sensitive the outcome is. Review the worst window as carefully as the best one before making a decision.
A real investment can differ because of execution price, bid-ask spread, commission, tax, product expenses and the data provider's closing-time convention. The figures are therefore a gross historical comparison, not a personal return or a forecast.
