Assessing insider transactions can take many forms, and this article, I'm going to look at one key aspect many investors may ignore: transaction size.
The average retail investor may choose to buy or sell stocks in certain denominations. Trading fees apply to each and every transaction, and depending on the brokerage firm one uses, the fees can cost as much as $10 per transaction.
Most institutional investors are able to buy chunks of stock in much larger denominations, effectively reducing their trading fees to near zero in percentage terms. Investors ought to remember that a $10 fee on a $1,000 investment is 1% on the buy side and 1% on the sales side; while 2% may not seem like a lot, buying and selling stocks consistently in this manner can eat away significantly at one’s long-term returns overtime.
As always, please remember to consult with a certified financial advisor and do your own homework before making investing decisions. Insider buying and selling activity is not necessarily indicative of the future performance of a given company’s stock price, and insiders regularly buy or sell positions in companies they own or manage for reasons other than expectations of future stock price performance.
Analyzing insider transactions in a given stock is one tool of many to glean pertinent information to assist in investment decision making.
Invest wisely, my friends.
