which is worse?

Actually both have their place. Neither is bad in and of themselves but rather in their application.
If I see a guy on a dark street carrying an open knife wearing bikers leathers and coming toward me i may generalize that people of that description mean me harm and i may stereotype him as a gang member. Both could be untrue but for self preservation I feel it would be justified. An extreme example to make a point I realize but I believe it to be so.