I welcome questions from my readers. Please email me at firstname.lastname@example.org if you have an investing-related question you’d like me to answer on the blog.
Q: What is the difference between insider buying and insider trading?
A: Insider buying is when officers, directors, or employees of a company buy stock in their own company.
This is different from insider trading, which is illegal. Insider trading is when corporate insiders make trades based on information that is non-public.
Insider buying is based on public information, and occurs when people within the company believe the stock price is going up.
Does insider buying mean you should buy as well? The answer is often times yes. But not all the time.
I personally don’t make buying decisions based on insider buying only. But it’s nice to see insiders buying a stock you own, because it means that they also believe in the future of the company.
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