Recovery time measures the duration between a portfolio's peak, its subsequent trough, and the eventual return to the prior peak. Drawdown depth and recovery time are related but not equivalent: a 20% drawdown in a volatile year might recover in months; a 20% drawdown during an economic structural shift might take years. The speed of recovery depends on the subsequent return environment, not just how far prices fell.
For buy-and-hold investors, recovery time is a waiting game that requires conviction in long-run equity returns. For market timers, recovery time is more complex — a successful exit reduces drawdown but introduces a re-entry problem. The exit itself is only half the trade; the re-entry must happen before the recovery runs too far, or the timing benefit is partly lost.
The historical record shows that many famous market peaks were followed by recoveries faster than investors expected, punishing those who exited correctly but re-entered too cautiously. Recovery time is therefore both a risk metric (how long until I am whole?) and a timing challenge (when is the right moment to get back in?).