Stereotyping is not only hurtful, it is also wrong. Even if the stereotype is correct in some cases, constantly putting someone down based on your preconceived pereptions will not encourage them to succeed.
Stereotyping can also lead people to live lives driven by hate, and can cause the victims of those stereotypes to be driven by fear. For example, many gays and lesbians are afraid to admit their sexuality in fear of being judged
The purpose of stereotypes is to help us know how to interact with others. Each classification has associations, scripts and so on that we use to interpret what they are saying, decide if they are good or bad, and choose how to respond to them (or not).