American in Paris

Diversifying Your ETF Portfolio with Low-Correlating Assets

I don't think anyone has shown that stop loss orders is a good strategy. If you have bought well diversified index funds and ETFs, then a stop loss merely locks in a loss. The best strategy is to buy and hold since broad indices will recover.

The only reason superficially compelling reason for using stop loss orders if it you have a need for cash in the near future. For example, retirement.

But if you need cash in the near future and use stop loss orders on your equity portfolio, what you are really saying is that you misallocated your portfolio - too much to volatile assets like equities and too little to cash and bonds.

To me stop loss is simply an admission that you didn't properly diversify and rebalance your portfolio.

Anyone who used stop loss last fall locked in immense losses. They look foolish now because market re-entry has largely proven to be a failure.