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In recent years, <keyword id="19902194" type="General" weightage="20" keywordseo="Anil-Ambani" source="keywords">Anil Ambani</keyword>'s <keyword id="20479923" type="General" weightage="100" keywordseo="Reliance-Group" source="keywords" meta.keywordsubtype="org" meta.entityname="Reliance Group" meta.hostid="153" meta.entityid="Reliance Group">Reliance Group</keyword> has seen marquee firms being auctioned in insolvency proceedings and piling debt-fold businesses. But the group has, in the week gone by, made announcements that investors believe may mark its transformation. In three days -- from September 18 to September 20 -- the group announced it has turned into nearly zero debt and is implementing long-term fundraising plans that are said to solidify its financial position. <keyword id="20144587" type="General" weightage="20" keywordseo="Reliance-Infrastructure" source="keywords" meta.keywordsubtype="org" meta.entityname="Reliance Infrastructure" meta.hostid="153" meta.entityid="Reliance Infrastructure">Reliance Infrastructure</keyword>'s board approved <keyword id="20431799" type="General" weightage="20" keywordseo="fund-raising" source="keywords">fund raising</keyword> of up to Rs 6,000 crore via preferential issue and QIP, while <keyword id="20024191" type="General" weightage="20" keywordseo="Reliance-Power" source="keywords" meta.keywordsubtype="org" meta.entityname="Reliance Power" meta.hostid="153" meta.entityid="Reliance Power">Reliance Power</keyword> board is meeting on September 23 to consider and approve the fundraise via multiple routes. The speed at which Anil Ambani moved to clear the debt of his companies, and simultaneously announce and execute the fund raising plans for future expansion of his companies, has surprised the investors. Shares of both firms surged on stock markets. The announcement to invest Rs 1,100 crore by the promoters group in Anil Ambani's flagship company, Reliance Infrastructure, has further boosted the confidence of investors in the group's revival plans and its long-term growth story, investors said. Anil Ambani's twin strategy of <keyword id="21440133" type="General" weightage="20" keywordseo="debt-reduction" source="keywords">debt reduction</keyword>, coupled with fresh capital raising, has set the stage for a long-term transformation of the Reliance Group, they feel. Reliance Infrastructure's <keyword id="20000950" type="General" weightage="20" keywordseo="market-capitalisation" source="keywords">market capitalisation</keyword> by the end of this week surged nearly 50%, rising from Rs 8,500 crore to Rs 12,500 crore. Similarly, Reliance Power's market capitalisation increased over 25%, moving from Rs 11,500 crore to Rs 14,600 crore. Reliance Infra announced a significant reduction in standalone external debt, lowering it from Rs 3,831 crore to just Rs 475 crore. This was achieved by clearing outstanding dues to prominent lenders such as Life Insurance Corporation of India (LIC), Edelweiss ARC, ICICI Bank, and Union Bank, according to company filings. The move signals a robust financial recovery and enhances Reliance Infra's financial flexibility. Also, Reliance Infra board approved a preferential issue to raise Rs 3,014 crore, increasing the stake of Risee Infinity Pvt Ltd, a promoter group entity, along with other investors such as Florintree Innovation LLP and Fortune Financial &amp; Equities Services Pvt Ltd. The board also approved seeking shareholder authorization to raise an additional Rs 3,000 crore via a qualified institutional placement. This will provide further capital to strengthen the balance sheet and invest in new growth opportunities. With these fund infusions, Reliance Infra's net worth is set to rise from over Rs 9,000 crore to more than Rs 12,000 crore, according to the filings. The company is now well-positioned to invest in high-growth sectors, investors said.

Anil Ambani's Reliance Group starts transformation journey, achieves near zero-debt

<ul class="summary-list"><li>The creator and marketing company Triller is finally trading on the Nasdaq under the ticker ILLR.</li><li>The company went public via a reverse merger with a Hong Kong-based company called AGBA.</li></ul>The creator services, entertainment, and marketing company Triller — which once positioned itself as a rival to <a target="_blank" class="" href="https://www.businessinsider.com/how-tiktok-is-changing-music-industry">TikTok</a> — made its stock market debut on the Nasdaq Wednesday.The company went public via a reverse merger with AGBA Group Holding Limited, a Hong Kong-based wealth management and healthcare firm. A reverse merger occurs when a private company goes public by acquiring a publicly listed company.Triller's stock was down about 20% in its first hour of trading.It's been a tough few years for other creator startups that have made public market debuts, as companies like <a target="_blank" class="" href="https://www.businessinsider.com/faze-clan-decline-says-more-about-influencer-startups-than-esports-2023-10">FaZe Clan</a> and Clubhouse Media Group have struggled to show the type of growth that keeps investors happy. The creator economy has largely <a target="_blank" class="" href="https://www.businessinsider.com/the-creator-economy-is-having-an-identity-crisis-2024-1">failed to live up to lofty valuations set by VCs</a>, though <a target="_blank" class="" href="https://www.businessinsider.com/acquisition-spree-in-influencer-marketing-is-bolstering-the-creator-economy-2024-9">influencer marketing</a> remains a bright spot in the category.Triller's journey to a public listing has been a winding one. It explored going public via a special purpose acquisition company (SPAC) in late 2020, <a target="_blank" class="" href="https://www.reuters.com/article/uk-triller-m-a-exclusive-idUSKBN26W0V3/?">Reuters</a> reported. That didn't come to fruition, and in December 2021, the company announced plans to complete a <a target="_blank" rel="noopener noreferrer nofollow" href="https://www.businessinsider.com/triller-plans-public-reverse-merger-key-takeaways-revenue-losses-users-2022-3">reverse merger</a> with a company called Seachange International. It shut down that effort in June 2022 to instead do a <a target="_blank" rel="noopener noreferrer nofollow" href="https://www.businessinsider.com/triller-ends-reverse-merger-new-plan-to-go-public-2022-6">direct listing</a>. That also didn't last, as Triller switched again to a reverse merger with AGBA in April and withdrew its direct filing with the SEC in May.Now that investors can buy Triller stock, listed as ILLR, what is the company's pitch?Triller's business today includes a <a target="_blank" class="" href="https://www.businessinsider.com/investor-deck-shows-triller-pitch-aims-to-go-public-2023-5">mix</a> of creator, marketing, and entertainment services. It owns its <a target="_blank" class="" href="https://www.businessinsider.com/triller-gives-up-on-making-money-from-its-namesake-app-2023-8">namesake TikTok-style video app</a>, as well as a fan engagement tool called Fangage, an influencer-marketing platform called Julius, a combat-sports streamer called TrillerTV (formerly dubbed FITE), and a text-marketing tool Cliqz, among other products.AGBA's investor materials around Triller talk about how its different products interact to serve marketers and creators. Creators on Fangage can connect to services like Julius or the Triller app, for example.In filings, AGBA also highlights Triller's work in the buzzy area of AI. The company described Triller's business in an August filing as "a global, artificial intelligence powered technology platform that serves a broad constituency of creators and brands around the world."It's not the first time that Triller's tapped into a trendy topic in tech to connect with investors. In October 2022, as <a target="_blank" rel="" href="https://www.businessinsider.com/facebook-new-name-meta-rebrand-metaverse-zuckerberg-apps-2021-10">Big Tech</a> and startups alike were captivated by the idea of digital worlds called "metaverses," Triller <a target="_blank" rel="noopener nofollow" href="https://www.prnewswire.com/news-releases/triller-introduces-the-metaverz-your-all-access-pass-to-global-entertainment-301651110.html">announced</a> it was launching its own version called the Metaverz. AGBA said in its August filing that the Metaverz could offer augmented reality and virtual experiences, including virtual merchandise stores, for creators and brands.<h2 id="97d853f9-c0dc-41c2-a32b-f81609fd067b">Who are Triller's customers?</h2>Creators, brands, and consumers are the main cohorts that AGBA touts as central to Triller's business in its recent filings. In its description of those stakeholders, the company has discussed both customers that Triller worked with directly and others that it "tracked" but did not have direct relationships with.For example, in an August preliminary proxy statement, the company said Triller's creator accounts grew from somewhere around 2.37 million at the start of Q1 2021 to around 2.47 million in the first quarter of this year. But that tally includes creators the company doesn't directly work with but rather tracks to help "brands identify creators that may be appropriate for their marketing activities."The company had a similar approach for tallying brand partners, examining both brands that it worked with directly and brands that it tracked but were not actively using its products. The number of direct brands it worked with declined from around 250 in Q1 2021 to around 200 in Q1 2024, per a chart in AGBA's August filing.AGBA's tally of consumer accounts for Triller, which includes people who use its products like its Triller app and its combat streamer TrillerTV, also counted accounts that were not directly tied to its owned-and-operated products.AGBA said that as of March 2024, Triller had about 337 million consumer accounts, including inactive accounts, across platforms like the Triller app, TrillerTV, and its combat business BKFC. It separately counted an additional 109 million consumer accounts tied to properties it didn't own but established on behalf of brands and creator partners, including a "Triller brand customer's social media account on Facebook, Instagram, YouTube, or other platforms."Triller's approach to reporting on its user base has come under scrutiny in the past. In 2020 and 2021, former employees and other people with knowledge of Triller's reporting told media outlets like <a target="_blank" rel="noopener noreferrer" class="c-link" href="https://www.businessinsider.com/some-former-triller-employees-wary-of-monthly-active-user-count-2020-9">Business Insider</a> and <a target="_blank" rel="noopener noreferrer" class="c-link" href="https://www.billboard.com/pro/triller-inflating-public-user-figures/">Billboard</a> that its public monthly active user numbers were inflated compared to internal data and what it shared with rights holders. Former Triller CEO Mike Lu told BI in October 2021 that the former employees were "disseminating inaccurate information." Lu told Billboard in February 2021 that Triller would no longer share monthly active users or daily active users as they didn't accurately represent its business and that it had "never inflated any user numbers."<h2 id="091877de-6fa2-45d6-8bd7-e25fc6976d54">What do Triller's financials look like?</h2>Here's a rundown of what Triller's financials were as of early 2024, per AGBA's filing.<ul><li>As of March 31, 2024, Triller had cash and cash equivalents of $800,000, a working capital deficit of $270.7 million, and an accumulated deficit of $1.6 billion, AGBA wrote in its filing.</li><li>In the first three months of 2024, the company earned about $9.9 million in revenue and saw a net loss of $43 million, compared to about $9.2 million in revenue and a roughly $29 million net loss over the same period in 2023.</li><li>The company earned $45.5 million in revenue in 2023, a 4.5% decline from 2022. Its comprehensive loss in 2023 was around $299 million, up from around <a target="_blank" class="" href="https://www.businessinsider.com/triller-heads-nyse-public-tightening-losses-tweaking-pitch-key-takeaways-2023-8">$196 million</a> in 2022. The company previously told BI that some earlier losses were tied to acquisition costs.AGBA wrote in its August filing that Triller has incurred losses each year since its inception and may not become profitable in the future. It said the company has financial obligations which have come due in the past six months and are coming due over the next twelve months and it may not be able to meet its cash obligations as those amounts come due.Triller has been embroiled in legal disputes with music platforms that it previously licensed songs from, contract claims from former employees and business partners, and a dispute over rent payments to the company it leased office space from. AGBA wrote that Triller "may not be able to generate sufficient cash flow to meet its current and any future debt service and other obligations, including amounts owed pursuant to new and ongoing litigation matters."A spokesperson for AGBA did not provide comment by time of publication. Triller did not reply to Business Insider's request for comment.</li></ul>

Triller is finally a public company after years of false starts. Here's its pitch to investors.

<ul class="summary-list"><li>Peter Doyle's Kinetics Paradigm Fund rose over 20% in October and is up 97% year-to-date.</li><li>The fund has outperformed the S&amp;P 500, driven by Texas Pacific Land Corporation's 148% gain.</li></ul>Earlier this year, we started highlighting some of the <a target="_blank" class="" href="https://www.businessinsider.com/investors-of-the-month-top-fund-managers-stock-picks-august-2024-9">top-performing fund managers each month</a> as a way to highlight money managers delivering impressive returns who might be flying under the radar.Narrowing selections isn't the easiest task. Do you consider all funds, even those leveraged for outsized returns? What about funds listed outside the US, which most readers don't have access to anyway? What if a fund is up big in a particular month but performing just average over the last year and even worse over a longer time horizon?These questions resulted in selecting fund managers from a few different categories over the last couple of months, but going forward, we're to handle things a bit differently. For our investor of the month, we'll select a fund manager by considering a few different criteria: their fund is listed in the US; their fund outperformed peers in a given month; and their fund is outperforming a benchmark index (in most cases this will be the S&amp;P 500) on a trailing 12-month basis.Weighing these factors, choosing our investor of the month for October wasn't difficult.It's Peter Doyle, manager of the Kinetics Paradigm Fund (<a target="_blank" class="" href="https://markets.businessinsider.com/funds/kinetics-paradigm-fund-no-load-class-us4946136078">WWNPX</a>), which was up more than 20% in October and 97% year-to-date. Over the last 12 months, it has returned 78%, beating the S&amp;P 500's 35% gain. Over the longer term, the Paradigm fund's performance is even more impressive. Since December 1999, it's up 1,363% versus the S&amp;P 500's 304%.Rather surprisingly, Doyle has delivered these returns without the help of Nvidia or other Magnificent Seven stocks. The fund's top performer has been the Texas Pacific Land Corporation (<a target="_blank" class="" href="https://markets.businessinsider.com/stocks/tpl-stock">TPL</a>), a firm that makes money leasing the land it owns in the western part of Texas.Demand from AI firms looking to build out data centers on the land has pushed up shares of TPL a staggering 148% year-to-date."The amount of capital that's going to be spent to build out data centers and bringing AI and all of the things that are associated with that to fruition needs to be done where there's cheap energy, cheap electricity, and available real estate, and water," Doyle told Business Insider. "I think people are coming to the conclusion, although I think we're still early in the game, that a big chunk of that is going to take place in the western part of Texas."The stock is the Paradigm Fund's top holding and has soared to a 65% weighting in the fund amid its outperformance, even as Doyle has drastically taken profits and reduced his position by around half. When Doyle opened his position in the stock, its weight in the fund was 8%.Despite its massive weighting in the fund, Doyle seems extremely confident in the company and said its business model is highly predictable."They own very valuable real estate, and I know that that real estate is basically not going anywhere. And I know that people want to build AI data centers, and I know that that's the most logical place for that to happen in a very significant way," Doyle told Business Insider. "If 100% of my net worth were in TPL, I would be sleeping very well. That's how good I think it is."Other top holdings in the fund include the Grayscale Bitcoin Trust (<a target="_blank" class="" href="https://markets.businessinsider.com/stocks/gbtc-stock">GBTC</a>) at an 8.8% weighting, Brookfield (<a target="_blank" class="" href="https://markets.businessinsider.com/stocks/brppf-stock">BRPPF</a>) at 3.3%, and Landbridge (<a target="_blank" class="" href="https://markets.businessinsider.com/stocks/lb-stock">LB</a>) at 3.1%.

This fund manager up 97% this year thanks to an under-the-radar stock is BI's investor of the month for October

<ul class="summary-list"><li>The economy is sending a signal for investors to flock to get defensive, Ned Davis Research said.</li><li>M2 money supply is shrinking, an indicator that's typically favored defensive stocks, strategists said.</li></ul>The economy has been flashing a warning sign for more than a year — and it's telling investors that they should be paying more attention to a particular area of the stock market, according to Ned Davis Research.Strategists at the firm pointed to the contraction in the money supply, a measure of how much money is flowing around in markets and the economy.The economy's stock of M2, one class of the money supply, has been shrinking in real terms since the start of 2022. Historically, that signal has preceded the start of a recession, and has typically indicated an environment in which defensive stocks outperform cyclical stocks, the firm wrote in a report.The M2 money supply has been distorted since the early days of the pandemic, the firm said. In 2020 and 2021, the Fed grew its balance sheet, which added to the money supply. But the central banks has been <a target="_blank" class="" href="https://markets.businessinsider.com/news/bonds/federal-reserve-balance-sheet-inflation-rate-hike-monetary-policy-crash-2022-11">trimming their balance sheet</a> since it kicked off its fight against inflation, reducing some of the excess liquidity in markets."Stocks have generally performed better when real M2 money supply is rising. Similarly, sector leadership has tended to be more cyclical when y/y growth has been at high levels," the report said. "While the growth rate has been moved higher in 2024, it remains in contraction territory, at levels supporting <a target="_blank" class="" href="https://markets.businessinsider.com/news/stocks/stock-market-investing-advice-inflation-april-cpi-fed-morgan-stanley-2024-5">defensive stock leadership</a>."<div type="image" title="Graph showing relationship between money supply and defensive stocks" height="886" width="1042" msid="114992210" hostid="261" sizebytes="68348"></div>That suggests investors should be heading into sectors like utilities, consumer staples, and healthcare, with the latter two sectors being <a target="_blank" class="" href="https://markets.businessinsider.com/news/stocks/investors-consumer-staples-economic-slowdown-defensive-stocks-recession-stock-market-2024-9">the best-performing</a> when the M2 money supply is running below its long-term average, the strategists added.Other forecasters on Wall Street have pointed to the contraction in the money supply as a potential omen for the economy. Steve Hanke, a Johns Hopkins economist, recently predicted a <a target="_blank" class="" href="https://www.businessinsider.com/recession-outlook-hard-landing-economy-inflation-job-market-signal-slowdown-2024-8">recession by early 2025</a>, pointing to the contraction in M2 as one of the warning signs.Still, the consensus on Wall Street is that the US economy looks to be on solid footing, with GDP expanding in the third quarter even as inflation continued to cool. Economists see the odds of a <a target="_blank" class="" href="https://www.bankrate.com/banking/federal-reserve/economic-indicator-survey/">recession in the next year at just 33%</a>, according to a third-quarter survey conducted by Bankrate.

A warning signal in the economy is telling investors they should load up on defensive stocks, research firm says

<ul class="summary-list"><li>Famed "Big Short" investor Michael Burry is benefiting from the recent surge in Chinese stocks.</li><li>Burry's Scion Asset Management has nearly half of its portfolio invested in Chinese tech giants like Alibaba.</li></ul>The <a target="_blank" class="" href="https://www.businessinsider.com/chinas-stimulus-boosts-emerging-markets-stocks-2024-9">surge in Chinese stocks this week</a> should be music to the ears of hedge fund manager Michael Burry of "The Big Short" fame.Burry began aggressively buying Chinese stocks in the fourth quarter of 2022, and it seems to finally be paying off.According to 13F filings, Burry's Scion Asset Management, which manages about $200 million, has about half of its portfolio invested in Chinese tech giants.Burry counts <a target="_blank" class="" href="https://markets.businessinsider.com/stocks/baba-stock">Alibaba</a> at his largest position at 21% of the portfolio, and he was still buying the stock as recently as the second quarter, boosting his stake by 24%.Burry also has 12% of his portfolio invested in <a target="_blank" class="" href="https://markets.businessinsider.com/stocks/bidu-stock">Baidu,</a> and another 12% of his portfolio invested in <a target="_blank" class="" href="https://markets.businessinsider.com/stocks/jd-stock">JD.com.</a> Altogether, Burry had about 46% of his portfolio invested in the three Chinese stock as of June 30.All three stocks have surged this week after <a target="_blank" class="" href="https://www.businessinsider.com/china-economy-aggressive-monetary-stimulus-interest-rate-rrr-2024-9?utm_medium=ingest&amp;utm_source=markets">China got serious about announcing stimulus plans</a> to revitalize its struggling economy.The People's Bank of China announce key interest rate cuts, lowered bank reserve requirements to stimulate lending, and said it plans liquidity support for the stock market.The country also encouraged its companies to start buying back stock.All of these measures and dovish speak from policymakers led to a massive surge in China's stock market this week.The <a target="_blank" class="" href="https://markets.businessinsider.com/etfs/ishares-msci-china-etf-us46429b6719?miRedirects=1">iShares MSCI China ETF</a> is up 18% so far this week. Meanwhile, shares of Alibaba, Baidu, and JD.com are up 19%, 18%, and 32% so far this week, respectively.According to data from HedgeFollow, which tracks and compiles data from 13F filings, the recent gains in China's stock market should mean Burry too is seeing some sizable gains in his portfolio, with Alibaba leading the charge.HedgeFollow estimates that Burry has an average cost per share of $78.83 for his Alibaba stake. Shares of Alibaba hit $105.25 in Thursday afternoon trades, representing an estimated gain of 34%.This assumes that Burry has not sold any shares since Scion's last 13F filing, which offers data as of June 30.Burry isn't the only hedge fund manager making money off of the recent surge in China's stock market.Billionaire investor David Tepper said on Thursday that <a target="_blank" class="" href="https://markets.businessinsider.com/news/stocks/david-tepper-buys-chinese-stocks-country-launches-fiscal-stimulus-bazooka-2024-9">it's a buy "everything" moment for Chinese stocks.</a>Like Burry, Tepper count Alibaba as his hedge fund's largest position, making up about 12% of his $6.2 billion Appaloosa fund. Tepper believes there's more upside to be had in Chinese stocks due to their depressed valuations."Even with the recent moves they're like on a flat-line low compared to where they have been in the past. And you're sitting there with single multiple PEs, with double-digit growth rates for the big stocks that trade over here," Tepper <a target="_blank" class="" href="https://markets.businessinsider.com/news/stocks/david-tepper-buys-chinese-stocks-country-launches-fiscal-stimulus-bazooka-2024-9">said in an interview with CNBC</a> on Thursday.

'Big Short' investor Michael Burry bet half of his portfolio on Chinese stocks. It's finally starting to pay off.

<div type="image" title="For the unversed, trading in futures and options can be akin to setting their hard-earned money on fire" height="900" width="1200" msid="114064202" hostid="261" caption="&amp;lt;p&amp;gt;For the unversed, trading in futures and options can be akin to setting their hard-earned money on fire&amp;lt;/p&amp;gt;"></div> Once upon a time, there thrived a wild, wild land. Here, it was all about super high monetary stakes, lightning-fast trade deals, and bucketloads of money shifting hands every single second. This wilderness lured millions of individuals with the promise of super duper high returns. But, at what cost? Welcome to the unforgiving, ultra-risky wild west of <keyword id="19991165" type="General" weightage="20" keywordseo="Indian-equity-markets" source="keywords">Indian equity markets</keyword> called the <keyword id="145718" type="General" weightage="100" keywordseo="Futures-and-Options" source="Orion">futures and options</keyword>. Here, everyone seems to just fly right through the bright red-flagged warnings of financial risks to earn even a fraction of these promised returns. Most burn themselves in the process, but carry on nevertheless, as if nothing ever happened. <h2>Chasing the cloudy profits</h2>The data conclusively proves that every 9 out of 10 individuals only lost their hard-earned money in this land. But hey, what do the numbers know? Some hide their losses out of shame, some out of fear. The proponents, meanwhile, proudly boast unusually high returns on their investments, some open social media channels while others encourage their friends and family to take the plunge. Naturally, news of this unstoppable and humongous en-masse migration to the F&amp;O (futures and options) town has reached sheriff <keyword id="19901201" type="General" weightage="20" keywordseo="SEBI" source="keywords" meta.keywordsubtype="org" meta.entityname="SEBI" meta.hostid="261" meta.entityid="SEBI">SEBI</keyword>, galvanising them into action. After all, it was time to put a leash on this madness and save the common man. The inhabitants of this town doubled in the last 2 years, from 51 lakh in FY22 to 96 lakh in FY24—99.8% of whom were small and mid-income traders. But profits? Well, that's a different, rather completely absent story. <h2>Que Sera Sera, much?</h2>A recent report by SEBI (Securities and Exchange Board of India) that studied profits and losses made by traders in the equity derivatives segment between FY22-24 exposed the mad mania of futures and options trading in India, especially since the pandemic. Per the report, 91.1% of individual traders, or about 73 lakh traders had only lost money trading in futures and options in FY24. Between FY 22-24, over 1 crore traders, or about 92.8% of individual traders, had lost Rs 2 lakh each. But once bitten, twice shy? Well, not in this case. More than 75% of individuals, who had only made losses trading in F&amp;O in FY22 and FY23, continued to trade vigorously in FY24 as well, without any changes in the bottom line, which remained deep in red and negative. So, then all these traders must be uber-rich, with tons of cash and not much care to spare? Nope. 76% of traders in the F&amp;O space in FY24 had an annual income of less than Rs 5 lakh. 2 years ago, their share stood at 71%. And their choice of poison? Options! In FY24, 60% of traders made losses trading in futures, but a whopping 91.5% burnt their funds trading in options. Mind you, futures are riskier than options. With futures, which require significant capital investment, the buyer and seller both are contractually bound to adhere to the pre-determined strike price of the futures or options contract, irrespective of whether the prevailing prices are higher or lower (and thus, resulting in losses for either the buyer or seller). With options, since this adherence ain't necessary, individuals end up taking debt to take highly leveraged positions while trading here. <h2>Scale of the explosion</h2>Anyone who trades even infrequently will tell you that a demat account is the mitochondria or powerhouse of the trading cell. As of August 2024, India had over 17.1 crore <keyword id="20957284" type="General" weightage="20" keywordseo="demat-accounts" source="keywords">demat accounts</keyword>, which are a prerequisite for trading in the markets. India is the 9th biggest country in the world, in terms of total demat accounts. Did you know that our demat accounts are at par with the entire population of Bangladesh? Talk about scale! Just 4 years ago, in March 2020, this number was a mere 4 crore. Naturally, the total F&amp;O turnover on both <keyword id="20004725" type="General" weightage="20" keywordseo="NSE" source="keywords" meta.keywordsubtype="org" meta.entityname="NSE" meta.hostid="261" meta.entityid="NSE">NSE</keyword> and BSE has hit the roof, and also broken it. As of October 4, 2024, the total futures and options turnover on NSE stood at a massive Rs 4,78,27,27,750.30 crore. Good luck counting the thousands! <table style="border-width: initial; border-style: none;" class="redcator-table-advance"></colgroup><tbody><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Year </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Total Turnover (Both Futures and Options) (In Rs Crore) </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">2020-21 </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">64,36,03,951.51 </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">2021-22 </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">1,69,52,33,134.47 </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">2022-23 </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">3,82,23,26,468.06 </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">2023-24 </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">7,99,27,67,152.43 </td></tr></tbody><tbody></tbody><tbody></tbody><tbody></tbody></table>Source : NSE Another metric that underlines the meteoric growth of trading in India is the collection of STT or <keyword id="20930760" type="General" weightage="20" keywordseo="Securities-Transaction-Tax" source="keywords">Securities Transaction Tax</keyword>. As of September 2024, India's STT mop-up had gone past Rs 26,000 crore. Traders have to pay STT whenever they buy or sell any security in the market. So, more trading brings in more STT, and hence, more revenue for the government, so they're not really complaining. After all, this is certainly what they'd call enviable growth. As of August 2023, our STT collection stood at about Rs 21,599 crores. And in FY20-21, India's STT collection had been Rs 16,000 crore. If only our salaries also managed to grow at this rate! <h2>So, what's happening?</h2>Two things. One, it's the big bulls who are raking in all the moolah. And it's the younger lot (those aged under 30) who are propping them up for this. In FY24, 43% of individual traders in the market were less than 30 years of age. In just one year, this number has swelled by 12 percentage points from just 31% of individual traders. But who says ageing is bad? Wrinkles and silver hair seemingly have a propensity of incurring lesser losses in the market. In FY24, only 79% of traders aged above 60 years made losses, as compared to 93% of those aged below 30. Small and mid-income traders, which make up 98% of the total trader base, witnessed average losses per person of Rs 65,000 and Rs 1.5 lakh in FY24 in futures and options, respectively. The winner here? Clearly, the big bulls, who declared an annual income of over Rs 1 crore, ended up with average profits of Rs 96,000 per person this year. <h2>What’s the sheriff up to?</h2>The government has finally swung into action, hiking the STT rate for F&amp;O during this year’s budget. Effective October 1, 2024, the STT on futures stands at 0.02%, up from 0.0125%. For options, it was upped to 0.1% versus 0.0625% previously. Small margins, but huge impact oncoming. Says Puneet Sharma- CEO and Fund Manager at Whitespace Alpha, “SEBI aims to enhance market stability while safeguarding investor interests, reflecting the regulator's intent to balance risk management with market participation”. But this might come with its own share of challenges, too. “Stricter norms around leverage, transparency, and capital adequacy could limit the ability of investors to determine their own risk appetite, thereby stifling innovation in trading strategies. Over-regulation in an environment that thrives on strategic flexibility and creativity could dampen the market’s dynamism, affecting India's competitiveness in the global derivatives landscape”, he observes. SEBI recently came out with a set of guidelines that aim to thwart <keyword id="19972907" type="General" weightage="20" keywordseo="retail-investors" source="keywords">retail investors</keyword>' participation in futures and options and hinder them from taking undue risks. Here's a quick recap of what's to come for the residents of the F&amp;O town Margin Requirements: To battle the high volatility and chaos which is generally seen on expiry days(i.e the last mandated date, post which an option becomes invalid), SEBI will put in place an extreme loss margin (ELM) of 2% for all open short options on the day of expiry. Translation? Traders will need to pony up more cash upfront, leaving them with fewer funds to take on risky bets. It ain't a choice: No more of one expiry every single day! Going ahead, an exchange like BSE or NSE will just be able to offer weekly expiries, that too, only on one benchmark index, as opposed to an entire buffet it currently offers. At present, NSE offers weekly options contracts for its financial index, bank and midcap indices. But say goodbye to this, and hello to derivatives on only 1 index per exchange. Raising the bar: Effective November 30, 2024, the minimum contract value for index derivatives will be upped to Rs 15 lakh, from the present Rs 5-10 lakh. The hope is that by making it ultra-expensive to enter these trades, investors will be dissuaded from taking on risky trades. Pay upfront: Starting February 2025, those trading in options will have to pay the entire options premium upfront, even before their trades are executed. This is because options generally carry very high leverage, and paying a significant sum upfront can force traders to think twice. Invigilation Pro Max: Starting April 1 2025, to make sure that the number of positions for equity index derivatives does not slyly slip over the mandated limit, especially on expiry days when trade volumes are huge, the exchanges will have to take a minimum of 4 position snapshots randomly. The question is, will these injections of sobriety be enough to calm down the steroid-fed bull of the futures and options market in India? Well, only time and market turnover will tell! For more insights into the financial markets and business news, stay tuned to our site and social media handles. And don’t forget to subscribe to Business Insider India’s newsletters for your weekly dose of Simply Put! Disclaimer: The content on this website is for informational purposes only and should not be construed as investment advice. We recommend readers consult certified, qualified and registered advisors for professional and personalised financial advice.

SIMPLY PUT: SEBI is on a mission to take on the wild, wild west of futures and options in India. Here’s why, what, and how

Builders have too many new homes on their hands.Thanks to a construction boom years in the making, homebuilders are sitting on more newly completed homes than at any point since 2009, when the market was reeling from the global financial crisis. Despite the hefty ready-to-sell supply, a sizable chunk of those homes may never be sold to regular buyers. That strange reality says a lot about the hurdles for would-be homeowners right now.Both builders and buyers find themselves in a tricky position. Prices have <a target="_blank" href="https://www.businessinsider.com/personal-finance/mortgages/home-prices-drop">continued their climb</a> in most of the country. Mortgage rates dropped steadily over the summer, but that <a target="_blank" class="" href="https://www.businessinsider.com/personal-finance/mortgages/how-does-fed-impact-mortgage-rates">turned out to be a head fake</a> — in the span of a month, the typical rate for a 30-year loan increased by almost a full percentage point, and could rise further. Throwing down for a starter home is about 45% more expensive than renting, a far wider gap than the historical average of about 15%, according to monthly expense data tracked by John Burns Research and Consulting. Builders, meanwhile, are luring buyers with some perks but are barely budging on prices. That's partly because these companies have another place to turn: the rental market.Given the strong demand for rentals and a tough sales market, some builders are choosing to convert for-sale homes into rentals or offload inventory to investors who specialize in single-family-home rentals. Opportunistic investors — mostly small and midsize players, who own the vast majority of single-family rentals in the country — are happy to oblige.Four walls and a backyard are still the bedrock of the American dream. For those who can't afford to buy a house (or don't want to right now), the only option is to rent. That simple fact gives builders some breathing room, but it also means that a glut of new homes may not deliver the price cuts buyers have been anxiously awaiting.A <a target="_blank" href="https://www.businessinsider.com/housing-market-outlook-forecast-mortgage-rates-homebuilding-inventory-prices-2024-2023-12">golden run for homebuilders</a> is drawing to a close. When rising mortgage rates <a target="_blank" href="https://www.businessinsider.com/housing-market-mortgage-rates-outlook-home-prices-affordability-wealth-gap-2024-3">trapped many would-be sellers</a> in their homes two years ago, builders turned out to be the big winners — if you wanted to buy a home, your <a target="_blank" href="https://www.businessinsider.com/house-construction-building-boom-last-hope-new-homebuyers-housing-market-2023-7">best bet was probably new construction</a>. One economist told me last year that builders were "the only game in town" in some areas. Builders not only offered a welcome alternative to the <a target="_blank" href="https://www.businessinsider.com/housing-market-ice-age-higher-home-prices-fewer-sales-inventory-2023-5">frozen resale market</a> but could cut deals to make their homes even more appealing to the average buyer: <a target="_blank" class="" href="https://www.businessinsider.com/homebuilders-turn-to-mortgage-rate-buydowns-as-affordability-sours-2022-12">Mortgage-rate buydowns</a>, in which the builder pays the lender up front in exchange for lowering the buyer's loan rate, can save a new homeowner hundreds of dollars each month.Now, even with the freebies, builders are selling homes at a slower-than-expected pace as buyers grapple with worsening affordability, sharp swings in mortgage rates, and general uncertainty — people would rather sit on the fence than leap into a market with so many unknowns. With slower sales across the board, the number of homes on the market has climbed. There were 108,000 finished homes for sale at the end of September, some 48% more than at the same point a year ago. There were 258,000 homes under construction but not yet sold, another sizable figure — at the same point in 2019, there were about 194,000. Builders surveyed by John Burns Research and Consulting said they had an average of about 2.5 unsold homes in each of their communities in October, representing a 47% increase from a year ago. In October 2021, they reported only 0.4 unsold homes per community. Some of this increase is by design. Companies are building more homes "on spec," or before they have a buyer, to shorten timelines and compete directly with the resale market. But there's no question that builders have hit a snag.The answer might seem obvious: Cut prices! But builders will "try a lot of other things first," says Keith Hughes, an executive at the housing research firm Zonda. "And we're not seeing drastic price drops virtually anywhere." Buyers may not be flooding the market, but there are fewer homes out there, too. The number of available homes for sale at the end of October, according to <a target="_blank" href="http://Realtor.com">Realtor.com</a>, was about 21% lower than in the same month in 2019. Builders looking to move their product lean heavily on incentives — Lennar, one of the largest homebuilders in the country, said that the average sales incentives per home amounted to $48,100 from June through August, compared with $36,400 a year earlier. Builders are also completing smaller floor plans to match the needs of cost-conscious consumers.Builders have another fallback: the rental market. Over the past decade, homebuilders have forged relationships with companies that <a target="_blank" class="" href="https://www.businessinsider.com/single-family-rental-investor-conference-buying-more-homes-2021-12">purchase thousands of single-family homes</a> and manage them as rentals — if a builder were looking to move a portfolio of homes, they might find a willing buyer in a company like Pretium, which owns nearly 100,000 homes, or Invitation Homes, which manages a portfolio of more than 85,000 homes. Builders have also started <a target="_blank" class="" href="https://www.businessinsider.com/wall-street-single-family-rental-build-to-rent-houses-finance-2021-7">developing entire communities of single-family homes</a> to be rented out rather than sold, a strategy known as build-for-rent. The idea is to meet the demand of renters who want their piece of the American dream — a home with a yard in a safe neighborhood with good schools — but either can't make a purchase or don't want to. Builders can sell to a guaranteed buyer willing to purchase in bulk or hold on to the homes and enjoy the steady returns of rental income. Given these advantages, the build-to-rent pipeline has become robust. D.R. Horton, the nation's biggest homebuilder, recently said it had about $800 million worth of single-family-rental property on its balance sheet, consisting of 3,140 homes and about 1,900 lots on which it can build more. Invitation Homes, one of the largest owners of single-family rentals, recently said it expected to purchase nearly 2,500 homes in the next couple of years from builders in places like Tampa, Florida; the Carolinas; and Houston.Owners of single-family rentals have been around forever, but large, sophisticated SFR companies <a target="_blank" class="" href="https://www.businessinsider.com/single-family-rental-companies-institutional-backers-homes-wall-street-2020-12">arrived after the financial crisis in 2008</a>, when investors began raising billions of dollars to pick up homes on the cheap. Now these companies represent a "new category of buyers that would really help a builder during a downturn unload some inventory," John Burns, of John Burns Research and Consulting, said in a recent podcast with Don Mullen, the CEO of Pretium. "And you're playing that out right now, you're already doing that."But big companies actually <a target="_blank" class="" href="https://www.businessinsider.com/average-americans-beating-wall-street-new-homes-real-estate-homebuying-2023-11">own a small fraction of all single-family rental homes</a>, and they've been much more selective with their purchases as higher interest rates have made it tougher to get strong returns on their investments. The <a target="_blank" class="" href="https://www.businessinsider.com/mom-and-pop-landlords-homeownership-rent-wall-street-corporate-investors-2024-7">most active buyers right now are small and midsize investors</a> who own anywhere from a handful of homes to several hundred. With builders sitting on more homes, these investors are sniffing around for deals."I think investors are more or less saying to themselves, we're providing a solution here for builders, and that solution is inventory management and getting out of inventory that otherwise they're having trouble selling," says Adam Stern, the founder and CEO of Strata SFR, a real-estate brokerage focused on single-family rentals and build-to-rent homes. "We're that exit option."Data from <a target="_blank" href="https://www.forecasa.com/">Forecasa</a>, a real-estate analytics firm, indicates investors purchased 3% to 5% of homes sold by builders in the past three months. That may not sound like much, but a year ago that number was closer to 1%. Some builders have recently been shuttling about 10% of their inventory to investors. Even then, these numbers may be undercounts, since some amateur rental owners may not be buying through the kinds of legal entities that tip off analysts to investor purchases."It may seem like a small percentage, but if you think about just the sheer volume of properties that are being moved, it's a fairly large number, especially because it's growing," says Sean Morgan, the CEO of Forecasa.Investors have mostly focused on Sun Belt markets like Nashville and Dallas in the lower half of the US, where new construction is most plentiful. Builders may offer a slight discount, but they get something valuable in return: homes off their balance sheets. Builders often take on loans of 12 to 24 months to construct homes — before time is up, they have to either find a buyer or get a new loan. Local and regional builders are more likely to feel the squeeze than a national company like D.R. Horton, which can afford to keep homes on its books longer. When builders are staring down that ticking clock, "investors are natural buyers," says Alex Offutt, the CEO of Business Purpose Capital, a capital provider for long-term investor loans. Builders don't even have to sell, though. Another route is to get a new long-term loan based on the rental income the properties will generate, then find tenants for the homes and wait to sell when the market is more favorable. Both Offutt and Ray Sturm, a managing partner of Tower1, which offers financing for residential lenders, tell me they've been having more conversations with builders and their lenders who are seeking out this option."They know if they work on a rental campaign, they've got an exit," Sturm says. "It's early, but it's bigger than I thought."This isn't the ideal scenario for most builders, especially since many aren't well versed in the minutiae of managing rental properties. But it could become another valuable off-ramp if they have trouble unloading homes.Most homebuilders are a long way from hitting the panic button. There's still a <a target="_blank" class="" href="https://www.businessinsider.com/us-housing-affordability-home-shortage-market-construction-population-cities-zillow-2024-6">national housing shortage</a>, even if there's a short-term oversupply in some places, and builders are <a target="_blank" class="" href="https://www.businessinsider.com/housing-market-ice-age-homebuyers-mortgage-rates-spring-real-estate-2024-10">looking ahead to the spring buying season</a> as the true tell of where things are headed. Their embrace of the rental market says more about the obstacles for buyers than for builders. Prices and borrowing rates haven't provided relief for those looking to make a purchase. People who already own homes are reluctant to sell and move up, which means they're not freeing up the starter homes that first-time buyers crave. Would-be buyers have nowhere else to turn but the rental market — Redfin estimates that the number of renter households is growing three times as fast as homeowner households.The housing market "is in limbo," says Selma Hepp, the chief economist at the real-estate data firm CoreLogic. "It's sitting on the sidelines. It's waiting."<a target="_blank" rel="" href="https://www.businessinsider.com/author/james-rodriguez">James Rodriguez</a> is a senior reporter on Business Insider's Discourse team.

How investors are about to profit from a tidal wave of new homes

George Wilson learned the hard way that there's no such thing as a free lunch — or, in his case, a free dinner that cost him a chunk of his retirement savings.As a retiree, he regularly received postcards in the mail, offering to teach him about finance and how to make money in retirement. They usually involved a presentation at a nice restaurant, and he would go without acting on any of the investment advice.But on one occasion, Wilson did take the bait after a brochure he received in 2010 inviting him to an evening at Ruth's Chris Steak House ended up costing him $158,000."It was a very good restaurant. And so, of course, it caught my attention," Wilson said in an interview.At that fateful dinner, he enjoyed his favorite top sirloin steak, asparagus tips, and a "fabulous" chocolate cake. He also met David Escarcega, one of the hosts and a broker who would eventually advise him to invest in so-called non-correlated, fixed-income alternative products from the <a target="_blank" class="" href="https://www.investmentnews.com/alternatives/gwg-holdings-files-for-bankruptcy/220355">now-bankrupt firm GWG</a>.Years later, Wilson is still fighting to regain what he lost from that investment. An arbitration decision recently awarded him $267,252 in compensation, including emotional distress damages from the last broker who facilitated the transaction. But the respondent only paid approximately $103,363.40 toward sanctions and the award. After costs, Mr. Wilson will end up with almost no payout, according to his attorney.Fancy restaurants with presentations are a common practice in the industry, says financial planner Michael Murray, adding that there are services that provide mailing lists of people with a certain net worth, and retirees are often on them because it's where wealth tends to be concentrated.But those meals aren't really free, Murray said. They're predominantly set up to sell high-commission products. In GWG's case, brokers earned up to 8% in commissions. What advisors can earn from one of these events pays for the meals and more. Picture a scenario where an advisor signs up $500,000 worth of investments with an 8% commission rate; that's a $40,000 payout. The math is very favorable for those who do this regularly, he added.Meanwhile, invitees feel like the hosts have done something nice for them and there's an implication that they should do something back, Murray noted. "So I think certain people will go to these dinner seminars and almost feel an obligation to work with someone."They're referred to as "free lunch seminars," said Adam Gana, a securities attorney who worked on Wilson's case. They're common in the industry. But Gana says that when brokerage firms offer them, he tells clients to run the other way."We see them all the time," Gana said. "I've represented 3,000 investors over the last 15 years, and in so many of those instances when we're dealing with a horrific product, a non-traded product, a product that's just terrible for investors, it usually starts with a free lunch."<h2 id="74285f86-a363-43ff-b132-9ec411f82f14">Risky business</h2>After the dinner, Wilson and his ex-wife Jean followed up with Escarcega at his office to discuss alternative investment options."We sat down with him, and he went through various opportunities that he could present to us, and we asked for several," Wilson said. "And the one that seemed the most attractive and that he extolled the virtues of the most was GWG. And so we thought about it for several weeks and went back and forth and then ultimately decided to do it."The products were non-publicly traded so-called LifeNotes, high-yield debt securities that paid a 9% monthly interest rate by GWG Holdings, according to documents viewed by Insider. They were based on life insurance policies purchased on the secondary market, with the expectation that death benefits would be paid to GWG's bondholders when the insured died. One brochure, viewed by Insider, advertised them as a "secured investment backed by a large portfolio of high-quality life insurance policies""Escarcega had pitched them as a safer alternative to the volatile stock market that could provide steady dividend payouts while preserving the principal investments, Wilson said."Of course, we want to leave our equity to our children but have some kind of income coming from it while we're still here," Wilson said. "And so that was very attractive to us, that we preserve our equity."Wilson initially purchased $180,000 worth of the notes using funds from his IRA, according to documents viewed by Insider. He later reduced his investment to $158,000 and flipped it to GWG preferred stock. For the next few years, things were looking good. Wilson received payouts monthly. In 2017, he decided to renew his investment, according to documents viewed by Insider.What he didn't know was that by then, Escarcega had been barred from selling securities after misrepresenting investment risks, according to FINRA. So Escarcega used his brother Adrian's license to submit the transactions through AGES Financial Services, according to arbitration documents from Wilson's attorneys. The Escarcegas could not be reached for comment.It was one of many details Wilson wasn't aware of. Thus far, the payouts had always been timely, he said. So, there was no reason to suspect there were problems. But there were. GWG's balance sheet wasn't adding up. FINRA had determined that it hadn't been profitable in over a decade. The firm had been selling new bonds to pay dividends to existing bondholders. The underlying collateral wasn't generating an income and multiple accounting firms refused to audit it, according to the amended statement of claim.The doom loop would eventually come to a screeching halt due to GWG's accounting issues, an SEC investigation, and failure to file its annual SEC report. By 2021, it could no longer sell bonds which led to its bankruptcy by 2022 and the halting of dividend payments, according to the amended statement of claim.Craig McCann, a consultant providing expert testimony in investment cases, including this one, said that GWG's insurance contracts were being overvalued on its balance sheet and the firm was assuming that people would die earlier. As a result, they estimated receiving the death benefits sooner. Simply put, there were not enough benefits being paid on the insurance contracts to cover the interest and principal due."There were lots of signals," McCann said. "There were lots of problems with their SEC filings and lots of reasons to believe that it was imminently going to happen, but most investors were very unsophisticated investors."In 2019, <a target="_blank" class="" href="https://www.investmentnews.com/alternatives/clients-win-another-gwg-bond-claim-this-time-against-b-d/245442">AGES had ended its relationship with GWG</a> due to a change in the company's business model, according to the firm. But Wilson says he was not informed by the firm, <a target="_blank" class="" href="https://www.investmentnews.com/fixed-income/investors-claiming-emotional-distress-damages-win-lawsuit-involving-gwg-bonds/257068">preventing him from selling his shares in time</a> (AGES disputes this). An arbitration panel found that the investment scheme was so egregious that they awarded him $267,252.00 in compensation that included emotional distress damages, according to the order. AGES paid $103,000 for all claimants.<h2 id="9e594bc3-8860-404f-8b63-aeb5d0906705">Risk reward</h2>Wilson's situation is a cautionary tale. He used his IRA to make the investment, so he's also faced with a required minimum distribution, which includes the amount invested in GWG even though it's nominal. He told Insider he must withdraw from other investments to meet the minimum.His case isn't an isolated one. There may have been thousands of brokers selling GWG bonds, based on data pulled from ADV filings as reported by McCann. Wilson says he lives with the guilt of advising his ex-wife and a friend who also invested in the bonds and lost their principal.Truth be told, it's difficult for the average retiree who is not financially savvy to understand the mechanics of many of these alternative investments, even when there are red flags, Murray said. Non-publicly traded investments take time to build capital before generating free cash flow. For those with lower cash reserves, they don't make much sense because they lack liquidity, he added.But Murray also emphasized that not all alternative investments are bad. He just thinks that if you're considering them, you must be financially savvy and have the ability to dig into offering statements, look at fee structures, and related party transactions. Even then, investors should resort to a second opinion from a fiduciary advisor, a CPA, or an attorney.Finally, understand that risk and reward are always tied together. Outsized promises of yields that are much higher than, say, the 10-Year Treasury is a red flag and means there's elevated risk, Murray said.

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