Insider Selling: What Does it Mean for You?

Business leaders are always going to want and encourage you to invest in their business…even if, in actuality, that business isn’t performing so well. As such, you should never just mindlessly trust what you’re told. Instead, you should do your own research before investing in any company or business, and you should also pay attention to trends going on within that business. If, for example, you notice that a lot of corporate insiders are selling their stock in a company, this could mean that there is trouble amiss.    

First of all, understand that, contrary to popular belief, insider trading/selling is not illegal providing that the trades are not based on non-public information. The only “catch” is that insiders do have to report when they buy or sell company stock of their own. Because this information is public, it should not be difficult to access, and you can use this information to help you make smart decisions about what to invest in and what to steer clear of.

Bear in mind that selling of inside company stock isn’t always a bad thing. Sometimes, for example, it can mean that the seller got a lot of free shares as part of his compensation package and doesn’t want or need all of them or wants to cash in on them to make a large purchase. Thus, you shouldn’t be too alarmed if you notice a few people selling large amounts of stocks at once.

You should potentially be concerned, though, if it seems like everybody in the company is “jumping ship” and selling their investments. They could be doing so because they know the company is in trouble and they want “out” before it’s too late.

You can easily take notice of any dangerous trends if you’re paying attention to reports from the Securities Exchange Commission (SEC). Furthermore, if you have an investment adviser- and you should- this person can be very helpful in monitoring reports and letting you know if there’s ever anything to be concerned about and, if so, how you should handle it. Stay on your guard and get the right financial help, and you should be just fine!