Understanding The Benefits Of Following What Insiders Don'T Trade

March 26, 2023

Introduction

When it comes to investing, there is no one-size-fits-all approach. Every investor has their own unique strategies and preferences when it comes to making decisions about where to put their money. One strategy that has been gaining traction in recent years is following what insiders don't trade. This strategy involves looking at the trading activity of corporate insiders, such as executives and board members, and then making investment decisions based on what they are not doing. While this may seem counterintuitive, there are actually several benefits to following what insiders don't trade.

The Power of Information

One of the main benefits of following what insiders don't trade is that it gives investors access to information that they would not otherwise have. Corporate insiders have access to a wealth of information about their company's performance and future prospects that is not available to the public. By looking at what they are not doing with their own money, investors can gain insight into how these insiders view the company's prospects and make more informed investment decisions.

Reducing Risk

Another benefit of following what insiders don't trade is that it can help reduce risk for investors. Corporate insiders often have a better understanding of the risks associated with investing in their company than outsiders do, so by looking at what they are not doing with their own money, investors can get an idea of which investments may be too risky for them. This can help them avoid potential losses and maximize returns on their investments.

Gaining an Edge

Finally, following what insiders don't trade can give investors an edge over other investors who are relying solely on publicly available information when making investment decisions. By having access to insider information, investors can make more informed decisions and potentially outperform other investors who do not have access to this information.

Conclusion

Following what insiders don't trade can be a powerful tool for investors who want to gain an edge over other market participants and reduce risk in their portfolios. By looking at the trading activity of corporate insiders, investors can gain insight into how these individuals view the company's prospects and make more informed investment decisions based on this information. While this strategy may seem counterintuitive at first glance, it can actually be quite beneficial for those who take the time to understand it properly and use it wisely in their investing activities.