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Insider trading does not and can not reduce ROI on your investments unless you’re a shop specialising in rapidly trading on corporate announcements.

• vkou 4y ago
  Of course it does. The money they make comes from their counterparties, which is people entering and leaving positions - namely, everybody else. It's not a large tax on each individual participant, but it's not magical free money.
  • prvit 4y ago
    If you were going to sell or buy at price $x, you would’ve done so regardless of the insider trader. I think the crucial detail you might be missing here is that markets are not zero sum games.
    • vkou 4y ago
      I buy and sell based on my availability of and need for money, not because I am timing the market. It's true that markets aren't zero sum games, but some insider extracting value from a stock in this manner does not create value for me. And the third point that I made very clearly creates incentives to turn it into a negative sum game. Good luck proving that Bob ran the company into the ground (and got rich doing so) because he's a crook, rather than just an idiot. You can't. (You also can't make running a company like a well-intentioned idiot illegal.)
      • prvit 4y ago
        > Good luck proving that Bob ran the company into the ground (and got rich doing so) because he's a crook, rather than just an idiot. You can't. Insider trading doesn’t make this any easier to prove. Bob can just start drinking or doing drugs before running the company into the ground, now his friends and family have a solid defense against any insider trading claims. Bobs drug problem isn’t material nonpublic information, but it sure as hell explains why everyone around him started shorting the company.