But note that "stop loss orders" become market orders when triggered and that means, of course, not that they will be liquidated/executed at the trigger price, but they will be executed at market. In a falling market, a large group of market sell orders can drive a market in deep loss territory...and you don't want to sell there.
It has been said that this was the reason for the great depth of the crash of 2008. A lot of trading programs (computer algorithms) had "stop loss orders" which when triggered caused the entire market to race to the bottom in an effort to trade out.
I'm not so sure about that. I believe computer trading is suspended after the market drops by a certain margin to avoid this very scenario.
I think the funds offer a good balancing mechanism for those who aren’t confident enough to own single stocks. Basically you’re paying the fun manager to do the homework and make the right choices and find the best mix.
What keeps me up at night are the doomsday scenarios, which a person can afford to neither ignore or bank on. The stop loss is probably the best protection, as long as the trigger is set to where you don’t incur losses on normal fluctuations but tight enough to guard against catastrophe. Of course finding that point is the tricky part...