6 ms·

> If Donald Trump had taken the millions he inherited > from his father and put it all into mutual funds, you'd > never have had to suffer through one o

> If Donald Trump had taken the millions he inherited > from his father and put it all into mutual funds, you'd > never have had to suffer through one of his books. But > he'd be just about as rich today. I made a half-hearted attempt to run the figures on that a few months ago — I'd be very grateful if anyone was sufficiently more diligent than me and ran the figures.

mbrock 11y ago
http://www.moneytalksnews.com/why-youre-probably-better-investing-than-donald-trump/ http://www.moneytalksnews.com/why-youre-probably-better-inve... "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."
- auntienomen 11y ago
  If you subtract 15% capital gains taxes every year, this 'only' comes out to $12 billion. (Which is why billionaires hate taxes.)
  - arbuge 11y ago
    Those taxes only apply if you sell though. If not, you get the full $20B, less 15% at the end (i.e. $17B) if you decide to quit cold turkey and convert it all to cash on the final day.
  - kulkarnic 11y ago
    You only pay capital gains taxes when you realize gains, not every year. Trump would pay 15% of $20B = ~$3B, so his net worth would be $17B. And this is assuming that his stock investments don't pay qualified dividends that are reinvested. So, yeah, he'd have much more than $12B.
    - Agathos 11y ago
      If you buy a stock and hold it, you don't have to pay capital gains along the way. But if you buy a mutual fund and hold it, capital gains will pass through to you whenever the manager sells stocks to adjust the portfolio. There are "tax efficient" mutual funds whose mission is to minimize that churn, but no fund can keep it at zero. I don't know how many tax efficient mutual fund options there were in 1982.
- adventured 11y ago
  It's of course even more drastic when you consider that the two (arguably) most authoritative sources on billionaire wealth measurement - Forbes [1] and Bloomberg [2] - consider Trump to be worth closer to $3 or $4 billion. He exaggerates his brand's value by about $6 billion. [1] http://www.forbes.com/sites/erincarlyle/2015/06/16/trump-exaggerating-his-net-worth-by-100-in-presidential-bid/ http://www.forbes.com/sites/erincarlyle/2015/06/16/trump-exa... [2] http://www.bloomberg.com/politics/articles/2015-07-28/here-s-our-tally-of-donald-trump-s-wealth http://www.bloomberg.com/politics/articles/2015-07-28/here-s...
- yummyfajitas 11y ago
  This calculation seems to ignore slippage. Donald Trump can't drop $500M into the S&P and get the same price per share that I can get if I drop $5k into it.
  - MagnumOpus 11y ago
    Yes he can, or at least nearly the same price with very little slippage. The S&P is not a single illiquid penny stock but a collection of 500 of the most liquid investments in the world, and 500 million dollars is a pittance compared to its capitalisation even back in the 80s. Sure, if he had to invest it in half an hour he would move markets - but if he had a year? No slippage from adding 2m a day distributed over 500 stocks...
  - ahh 11y ago
    It also assumes he consumed zero dollars from then til now. If he wanted to have a wealthy lifestyle, and can you really blame him, these passive returns drop quickly.
shrig94 11y ago
With a $40M - $200M estimated net worth and taking Sequoia's 30 year fund IRR of ~ 12%. Let's assume he started with $40M and inherited it in 1970 (45 years ago). If he dumped it into a 12% IRR Mutual Fund his net worth would be: (1.12)^45 * $40,000,000 = $6.6B which is greater than his $4B net worth. This of course is presumptuous at a lot of levels, but the math does make sense.
larrys 11y ago
The above, even if true, ignores the fact that if you love what you do (whether it be business or programming) not working or being involved is simply not as nice a life for certain types of people. Working toward and earning what you eventually end up is way more satisfying than simply being passive and finding yourself in later years with the same amount or more money. Of course I can see how someone who doesn't understand the love that someone has for what they do saying that.
michalu 11y ago
Yeah but he created tens of thousands of jobs and built some big buildings which I guess was the primary reason he was doing it not the money. As it is with many entrepreneurs, if not the vast majority of them. Besides at the time his father died in 1999 he was already a billionaire. And Fred Trump left about 200 mil to 4 kids and wife... as far as I know Donald got about $20 - $40 mil. Put that in the stock market at the peak of the tech bubble - not a great idea.

mbrock 11y ago

http://www.moneytalksnews.com/why-youre-probably-better-investing-than-donald-trump/ http://www.moneytalksnews.com/why-youre-probably-better-inve... "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."

auntienomen 11y ago
If you subtract 15% capital gains taxes every year, this 'only' comes out to $12 billion. (Which is why billionaires hate taxes.)
- arbuge 11y ago
  Those taxes only apply if you sell though. If not, you get the full $20B, less 15% at the end (i.e. $17B) if you decide to quit cold turkey and convert it all to cash on the final day.
- kulkarnic 11y ago
  You only pay capital gains taxes when you realize gains, not every year. Trump would pay 15% of $20B = ~$3B, so his net worth would be $17B. And this is assuming that his stock investments don't pay qualified dividends that are reinvested. So, yeah, he'd have much more than $12B.
  - Agathos 11y ago
    If you buy a stock and hold it, you don't have to pay capital gains along the way. But if you buy a mutual fund and hold it, capital gains will pass through to you whenever the manager sells stocks to adjust the portfolio. There are "tax efficient" mutual funds whose mission is to minimize that churn, but no fund can keep it at zero. I don't know how many tax efficient mutual fund options there were in 1982.
adventured 11y ago
It's of course even more drastic when you consider that the two (arguably) most authoritative sources on billionaire wealth measurement - Forbes [1] and Bloomberg [2] - consider Trump to be worth closer to $3 or $4 billion. He exaggerates his brand's value by about $6 billion. [1] http://www.forbes.com/sites/erincarlyle/2015/06/16/trump-exaggerating-his-net-worth-by-100-in-presidential-bid/ http://www.forbes.com/sites/erincarlyle/2015/06/16/trump-exa... [2] http://www.bloomberg.com/politics/articles/2015-07-28/here-s-our-tally-of-donald-trump-s-wealth http://www.bloomberg.com/politics/articles/2015-07-28/here-s...
yummyfajitas 11y ago
This calculation seems to ignore slippage. Donald Trump can't drop $500M into the S&P and get the same price per share that I can get if I drop $5k into it.
- MagnumOpus 11y ago
  Yes he can, or at least nearly the same price with very little slippage. The S&P is not a single illiquid penny stock but a collection of 500 of the most liquid investments in the world, and 500 million dollars is a pittance compared to its capitalisation even back in the 80s. Sure, if he had to invest it in half an hour he would move markets - but if he had a year? No slippage from adding 2m a day distributed over 500 stocks...
- ahh 11y ago
  It also assumes he consumed zero dollars from then til now. If he wanted to have a wealthy lifestyle, and can you really blame him, these passive returns drop quickly.

shrig94 11y ago

With a $40M - $200M estimated net worth and taking Sequoia's 30 year fund IRR of ~ 12%. Let's assume he started with $40M and inherited it in 1970 (45 years ago). If he dumped it into a 12% IRR Mutual Fund his net worth would be: (1.12)^45 * $40,000,000 = $6.6B which is greater than his $4B net worth. This of course is presumptuous at a lot of levels, but the math does make sense.

larrys 11y ago

The above, even if true, ignores the fact that if you love what you do (whether it be business or programming) not working or being involved is simply not as nice a life for certain types of people. Working toward and earning what you eventually end up is way more satisfying than simply being passive and finding yourself in later years with the same amount or more money. Of course I can see how someone who doesn't understand the love that someone has for what they do saying that.

michalu 11y ago

Yeah but he created tens of thousands of jobs and built some big buildings which I guess was the primary reason he was doing it not the money. As it is with many entrepreneurs, if not the vast majority of them. Besides at the time his father died in 1999 he was already a billionaire. And Fred Trump left about 200 mil to 4 kids and wife... as far as I know Donald got about $20 - $40 mil. Put that in the stock market at the peak of the tech bubble - not a great idea.