Why tight stop-losses often hurt investors

ASK investors how they manage risk, and many will give the same answer: tight stop-losses.

Tight stop-losses are widely viewed as a cornerstone of disciplined risk management, but they can sometimes work against investors’ long-term objectives.

A stop-loss is a predefined rule that forces the exit of an investment position when its price moves against the investor by a specified amount. Its primary purpose is to limit downside losses on an individual position without requiring continuous monitoring.