Trump Worth $10 Billion Less Than If He’d Simply Invested in Index Funds

Forbes reports Donald Trump is worth $4.1 billion; Trump says $10 billion. Either way, he’d be worth a lot more if he simply retired 30 years ago and put his money in an unmanaged stock fund.

Better Investing

Donald Trump traveled an old-fashioned route to fortune.

As he explained when he announced his bid for the 2016 Republican nomination for president:

“I made it the old-fashioned way. It’s real estate. You know, it’s real estate.”

While Trump did have a big head start — his father, Fred, was a multimillionaire New York real estate developer — there’s no doubt The Donald has created a fortune of his own. But if he’d stopped working 30 years ago, he could have done much better.

All he had to do was shift away from real estate and park his money in the same place that you can: an unmanaged stock index fund.

The background

To compare Trump’s performance to that of an unmanaged index fund, we need to know two things: his beginning net worth and his current net worth.

There’s considerable debate about Trump’s net worth. It’s estimated at $4.1 billion in the latest “Forbes 400” list, which puts him in the No. 133 spot of the richest folks in America. However, in July, he issued a press release announcing his net worth at $10 billion.

Fine. Let’s give him the benefit of the doubt and assume his net worth is $10 billion.

Now we need to establish his net worth at some point in the past.

Trump was on the Forbes 400 in 1982, when the magazine published its first annual list of America’s wealthiest denizens.

That year, Forbes said Trump’s fortune was “estimated at over $200 million,” but also acknowledged that Trump claimed it was “$500 million,” according to Timothy L. O’Brien’s book “TrumpNation: The Art of Being The Donald.”

Again, let’s give Trump the benefit of the doubt and assume he was worth $500 million in 1982.

The math

Imagine Trump had retired in 1982, sold his real estate holdings and invested his $500 million in the S&P 500 — that is, 500 stocks representing the American stock market.

From 1982 through the end of 2014, the S&P 500 index had an annualized return, including reinvested dividends, of 11.86 percent, according to MoneyChimp’s S&P 500 Compound Annual Growth Rate calculator.

Per this calculator, every dollar invested in January 1982 would have been worth $40 by December of 2014. That means Trump’s initial $500 million would have grown to $20 billion. That’s twice what Trump says he’s worth today.

You can beat The Donald

This comparison is notable for two reasons. First, it reveals that Trump may not always be as shrewd as he’d have you believe, especially considering he’s filed four corporate bankruptcies since 1982.

More relevant to your life, however, is that you can do what he didn’t: harness the twin tools of stocks and compound interest.

While few of us have the resources to invest in the stocks of 500 of America’s largest companies, nearly all of us have the ability to do so through mutual funds, like an S&P 500 index fund.

You probably have an S&P index fund, or something similar, in your 401(k) at work. They also can be found at nearly every investment firm, either as a mutual fund or an exchange traded fund, commonly known as an ETF.

If you decide to take on more risk and chase The Donald, you will need to make a couple of important decisions:

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  • miwingman2

    One of the many problems with this scenario is — nobody would do it.

    The S&P took a dump in the late 80s of about one third. Nobody would just stand pat and let that happen with hundreds of millions. Even a seasoned financial investment advisor would rebalance, and a trader wouldn’t have waited that long. Plus, putting every penny in the US stock market has zero diversification and would be considered risky.

    Hindsight is 20/20, but in this case hindsight is silly.

    • iCanada

      How would there be zero diversification? You would have exposure every single asset class , and considering most major American companies operate globally, you would get international exposure too.

      • miwingman2

        The S$P is made up of large cap US traded stocks. No mid cap, no small cap, no emerging — just large cap stocks. That is what I meant.

  • clint rogers

    trump also created businesses that created jobs and didn’t horde it in the capital markets,where the rich get richer and the lower income people have zero opportunity… at least he took chances and started businesses!

    • floral

      WHAT businesses did he start? Buying and selling RE is not starting businesses.

  • Something

    If I shorted Enron in 2000 I would have made a lot of money too…who cares what he could have had – I’d happily have a net worth of $4B lol

  • iCanada

    Does this math include the $100+ million salary he draws each year?

  • 4thaugust1932

    1. Regulate market capitalization of corporations
    2. Tax corporate revenues, not profits

  • michiganmoon

    I am NOT a Trump supporter. However, this article overlooks many factual errors in it’s logic based on it’s hypothetical situation for Trump:

    1) Had Trump sold $500 Million of Real Estate, he would have paid some Capital Gains Taxes and would have had less than $500 Million to invest in the S&P 500 index fund – shrinking the total at the end of 30 years.

    2) This article assumes that the stock is all in a NOT taxable investment account, which would be impossible. It would be in a brokerage, and he would pay taxes on those dividends every year – shrinking the total at the end of 30 years.

    3) This article assumes that he does not take any $$$ from his stocks dividend or shares as an income to live off of. Which is irrational, because he was taking profits from real estate as an income to live off of and living lavishly, he has also done a wee bit of charity, before reinvesting the rest back in to real estate. To make it comparable, Trump would have to sell off shares or collect dividends into his wallet from time to time for income to live lavishly – shrinking the total at the end of 30 years.

    Given the above, Trump likely did beat the advice given in this article, with that said the S&P 500 index fund is my favorite investment.

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