Why not have stop loss orders on all your stocks?

If you own stock XYZ (not a real stock) and it goes down is that a reason to sell? If you view the price of a stock to be a random walk, the fact it has gone down does not mean the pattern will continue.

I buy and hold stocks because I feel the company is in a good business and the price of the stock is cheap relative to what you are buying. As such, if the price of the stock falls (without a change to the fundamentals of the company) I want to buy more (assuming I have the money) not sell.

Therefore, I am not a fan of stop loss orders.

Here’s an example from my own lived experience:

A couple of years ago, I purchased a number of shares of Tesla at about $300/share with the underlying investing thesis that the world was turning a corner with electric vehicles. I then watched it drop from $300/share to $160/share until it slowly climbed its way up to over $2000/share. Yeah, the drop was a huge gut-punch and maybe at the time I was really questioning my decisions but the fundamental thesis held true and I am sure glad I stuck to it. A stop loss would have neutered the fun ride I enjoyed going all the way back up and then some.

So the moral is that a stop-loss might help you in some instances and can provide a tactical tool in your overall investing strategy, but it shouldn’t be the only tool. You don’t know what the future holds. For all you know, your sell point is $0.01 above the bottom right before it blows up.