Skip to Content
ETF Specialist

Stop-Loss Orders: A False Sense of Security

Rather than "insuring" your portfolio, you could be "ensuring" a loss.

The dust is still settling and fingers are still being pointed in the aftermath of what is now being called the "flash crash." Sorting out the mess will require much time and likely result in more fingers being pointed in multiple directions, but we simply have to accept the fact that markets will occasionally suffer bouts of extreme volatility--and be properly prepared to ride those waves until calmer waters prevail. 

While at this point there seems to be more questions than answers, we can't help but feel for some of the unsuspecting victims of this erroneous market action. But the first step in avoiding disastrous results in the short term is to avoid taking potentially perilous actions. Followers of Morningstar's exchange-traded fund research are more than likely familiar with our strong preference toward using limit orders when executing ETF trades. This helps ensure that you get a price at or extremely close to the fund's net asset value. After all, in a properly functioning market, a fund is worth simply as much as its constituent parts. If you are selling and not getting something very close to fair value, we would recommend not selling at all.

Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.

We’d like to share more about how we work and what drives our day-to-day business.

We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.

How we use your information depends on the product and service that you use and your relationship with us. We may use it to:

  • Verify your identity, personalize the content you receive, or create and administer your account.
  • Provide specific products and services to you, such as portfolio management or data aggregation.
  • Develop and improve features of our offerings.
  • Gear advertisements and other marketing efforts towards your interests.

To learn more about how we handle and protect your data, visit our privacy center.

Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.

To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.

Read our editorial policy to learn more about our process.