# The Shallow Fall Compounds

_Systematic Investing . 2026-07-28 . By Tanmay Kurtkoti. Educational, illustrative, not advice._

Sunday evening my father pulls up a comparison table on his phone. Eleven strategies side by side, sorted by five year CAGR, highest first. He points to the one at the top. "This is the one to own." I ask him to sort it the other way. By max drawdown. Shallowest first.

He looked at me like I had asked him to drive in reverse.

> The strategy that fell the least was the only one that finished 2025 in the green. Every other one was red.

## A fall and its recovery are not the same size

This is the part that tricks people. A 20 percent fall does not need a 20 percent rise to get back. It needs 25 percent. A 30 percent fall needs 42.9 percent. A 50 percent fall needs the market to double, a full 100 percent, just to stand where it was.

The relationship is not linear. It is a curve that gets steeper as you go deeper, and it gets steep fast.

_[Figure: Drawdown recovery asymmetry: recovery percentage needed vs fall percentage. Source . Arithmetic identity . Illustrative]_

One strategy falls 17.6 percent. Another falls 27.2 percent. Gap on the way down: about ten points. On the way back up, the shallow one needs 21.4 percent. The deep one needs 37.4 percent. A 16 point gap in the climb. The fall was roughly equal. The recovery cost was not even close.

## Eleven strategies, sorted the wrong way

I ran the comparison across the [RupeeCase marketplace](https://rupeecase.com/compare). Eleven strategies, same platform, same fee structure, same rebalance engine, different universes and different risk profiles. Most people sort by CAGR. Here is what happens when you sort by max drawdown instead.

| Strategy | CAGR | Sharpe | Max DD | 2025 Return |
|---|---|---|---|---|
| LargeMid Multi Asset | 37.12% | 1.74 | -17.61% | +10.1% |
| Allcap Multi Asset | 43.57% | 1.79 | -21.35% | -1.7% |
| Allcap | 48.02% | 1.77 | -22.70% | -4.1% |
| LargeCap Multi Asset | 25.03% | 1.28 | -23.23% | -3.1% |
| Alpha 5 | 58.34% | 1.61 | -24.72% | +2.0% |
| Midcap | 41.21% | 1.48 | -24.87% | +5.7% |
| Mid Smallcap | 48.98% | 1.61 | -26.17% | -8.7% |
| Focused Largecap 20 | 27.40% | 1.24 | -27.23% | -7.9% |

The one with the shallowest max drawdown, 17.61 percent, was also the only strategy that closed calendar year 2025 in the green. Not by a rounding error. By ten points, while nine of eleven were negative.

The strategy with the highest CAGR, Alpha 5 at 58.34 percent, fell 24.72 percent at its worst and barely scraped positive in 2025. The one most people would scroll past, the 37 percent CAGR, held its line and kept compounding while the rest were still recovering.

## The year that proved the point

2025 was a correction year. Not a crash. A slow grind that started in late September 2024 and has not fully recovered for some of the aggressive strategies even now.

_[Figure: Only one strategy finished 2025 positive. Source . RupeeCase backtest . 5Y rolling . all charges deducted]_

One bar to the right. Ten bars to the left. That is not a statistical coincidence. The strategy that drew down the least had the least to recover and got back to compounding first while the rest were still climbing out of their holes.

## What sits under the hood

Forty momentum stocks from the Nifty LargeMidCap 250 universe, each at roughly 2 percent weight. Equal weight, no concentration. Rebalanced every two weeks. The equity sleeve is 80 percent. The other 20 percent sits in two buffers: 10 percent liquid debt, 10 percent gold.

Same 80/10/10 framework as its twin, the Allcap Multi Asset, which runs on the broader Total Market universe. Same overlay, narrower stock pool. You give up about 6.5 points of CAGR (37.12 vs 43.57) and gain nearly four points of shallower drawdown (17.61 vs 21.35). Calmar ratio 2.11. Sharpe 1.74. Win rate 64.75 percent, highest in the marketplace.

The debt and gold sleeves are not decoration. In a correction, equity falls, gold tends to hold, debt stays flat. The rebalance engine sells what rose and buys what fell, every two weeks. Mechanical mean reversion across asset classes, not a timing call.

## The honest part nobody puts in the brochure

Here is where I have to be straight.

In a sustained bull run, this strategy will trail. It has to. Twenty percent of the capital sits in non equity instruments earning far less than a ripping stock market. Calendar year 2024 it returned 42 percent, strong, but the pure equity strategies did 30 to 60.

And 17.61 percent is still a real fall. On a Rs 10 lakh portfolio that is Rs 1.76 lakh of paper loss. It sat in drawdown for 350 days on its worst stretch. Nearly a year underwater.

The CAGR gap is real too. Rs 10 lakh at 37.12 percent compounds to about Rs 48.5 lakh over five years. At 48.02 percent, the same capital reaches Rs 71.1 lakh. That is Rs 22.6 lakh more. Lower ceiling for a shallower floor. If you can sit through the full cycle without panicking, the higher CAGR strategy wins on absolute return. The question is whether you can actually sit through it.

## The part the spreadsheet does not capture

A deeper drawdown is not just a bigger number. It is a longer period of feeling wrong, opening the portfolio to red for six months while the news says the correction is not over.

People do not hold through drawdowns by reading Sharpe ratios. They hold by not feeling like the ground has disappeared. A 17.6 percent fall feels like a bad quarter. A 27 percent fall feels like a mistake. The math is in the recovery table. The behaviour is in whether you are still in the seat when the recovery starts.

_[Figure: Recovery path: shallow fall recovers faster, resumes compounding sooner. Source . Illustrative . timing and magnitude simplified]_

The shallow strategy recovers first. While the deep one is still climbing back to its starting point, the shallow one has already resumed compounding on top of a higher base. That gap opens quietly and it does not close.

## Three things to check before you sort by CAGR

One. Convert the max drawdown to recovery needed. A 25 percent fall needs 33.3 percent just to stand where it was. That is not growth. That is repair.

Two. Check whether the strategy survived a real down year. 2025 was the first real test for many of these strategies, and most failed it. One did not.

Three. Ask yourself what you would actually do at the trough. Not what the spreadsheet assumes. What you would do at month eight, when the one you chose is down 25 percent and the one you passed on is down 17. The [risk profile quiz](https://rupeecase.com/risk-profile.html) can help you find that honest answer. The strategy you can hold is the strategy that compounds.

The CAGR number is the finish line. The drawdown number is whether you are still running when you get there. I would rather own the one I can hold through a bad year than the one that looks better in a table I will never sit still long enough to collect on.

Sort by the fall. The return takes care of itself.

[Explore the LargeMid Multi Asset strategy](https://rupeecase.com/strategies/largemid-multi-asset) to see the full drawdown profile and backtest data.