Often times, the market will fall by a large percentage, leaving investors to wonder how much will it have to climb back up for their investments to get back to even.

It’s not as easy as: If the market drops 10%, then it needs to go up by 10% to get back to even. It actually has to grow even more to get back to even. For example, it would need to climb 11.1% to recover from a 10% fall. The numbers get a bit worse if the market declines further. A fall by 50% requires a 100% gain to get back to even, and a 75% correction requires a 300% gain to get back to even.

If we assume no new money is invested, and just let our money ride through the dip, there is a simple formula to figure out the needed correction:

(1 / [1-D]) – 1

D is the percent drop in decimal format; ie 30% = 0.3

So a 40% correction in the market requires what increase to get back to even?

(1 / [1 – 0.4] – 1)

[1 – 0.4] = 0.6

1 / 0.6 = 1.67

1.67 – 1 = 0.67

Answer: A 67% increase in the market.

And what is the market? I usually look to the S&P500 because it comprises the largest 500 U.S. companies, or 80% of the total market. The Dow is often reported, but it is less of an indicator and is just 30 companies. The two are very close, but I like the S&P500 as I feel it is more representative.