Holding stocks without a clear exit strategy can be devastating to a portfolio.
When the stock begins to fall there is a clear exit signal to sell.
Supposed low risk, blue chip stocks, such as Australian companies BHP Billiton and Woolworths for example, are not immune to large down trends. SET Investments exited BHP Billiton on 29/4/11 @ $43.36 and Woolworths on 9/6/14 @ $37.04. At the time of writing, losses of 39% and 40% respectively have been avoided over buy and hold investors.
Another Australian stock, Slater and Gordon, had trended strongly to $8.01 on 7/4/15. SET Investments exited on 20/4/15 @ $6.80. At the time of writing, losses of over 90% have been avoided over buy and hold investors.