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

1. Pick an asset class. You could buy stocks or bonds, as well as choose from a slew of other alternative investments. To keep things simple, however, nothing wrong with sticking with just stocks and bonds.

Many experts urge average investors to put their money in mutual funds rather than buy individual stocks and bonds. You can choose a stock mutual fund, a bond mutual fund or a portfolio of mutual funds that includes both stocks and bonds.

In our hypothetical example above, we chose a pure stock mutual fund. That’s because, in the long run, stocks offer a greater rate of return than other asset classes such as bonds.

As Money Talks News founder Stacy Johnson explains in “Beginning Stock Investor? Here’s All You Need to Know“:

Depending on how you measure it, stocks have averaged 8 percent to 10 percent annually over the last 100 years. Of course, stocks entail risk; that’s why they pay more.

Fortunately, mutual funds help mitigate risk because they are made up of a wide variety of stocks. That helps spread the risk — if one company in your mutual fund goes bankrupt, it won’t wipe you out.

2. Pick active or passive management: Actively managed stock mutual funds are run by financial professionals who decide which individual stocks within the fund to buy and sell. They make these judgments based on their expectations of future market performance.

Such managers aim to outperform stock market indices — and they charge higher fees for their effort.

Passively managed stock mutual funds, often referred to as index funds, simply aim to mirror the success of a stock market index.

Here’s Johnson again:

Owning an index fund is like owning the entire stock market, as represented by an index, like the S&P 500. Since all an index fund manager has to do is buy the stocks in the index, a chimpanzee could do it. And because management is simple, the fees charged are minimal.

Study after study has shown that index funds historically have performed better — at a lower cost to the investor — than managed funds over a long period of time.

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Johnson is hardly the only expert who champions index funds.

Warren Buffett, billionaire investor and CEO of Berkshire Hathaway, made headlines last year when he wrote in his annual letter to shareholders that his fortune is destined for index funds. Buffett wrote of the instructions laid out in his will:

My advice to the trustee could not be more simple: Put 10 percent of the cash in short-term government bonds and 90 percent in a very low-cost S&P 500 index fund. (I suggest Vanguard’s.) I believe the trust’s long-term results from this policy will be superior to those attained by most investors — whether pension funds, institutions or individuals — who employ high-fee managers.

Perhaps that wisdom is why Buffett is in the No. 2 spot on the Forbes 400.

How would you have invested $500 million in 1982 — real estate or index funds? Share your thoughts with us in the “Comments & discussion” section below, in ourForums or on our Facebook page.

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  • grandmaguest

    In 1982, other than my home at that time (it also had a small apartment that I rented out), I purchased 80 acres for my livestock. They were on a rented pasture at the time. But I also had decided that once I had the land paid for I would build my home on it and sell the “town” property.
    The rest of my funds…..a minimum of 15% of income went into 403b mutual fund stocks and a regular IRA. And as I could afford it, at one time I was putting 30% in my 403b. Unfortunately I couldn’t afford to do that for very long and had to drop it back down. As soon as the Roths came out….I immediately put my mutual funds into that. I had no match on my 403b, so making that decision was a no brainer to me.
    After doing a lot of studies regarding mutual funds, I made some wonderful investments at Vanguard and have never looked back. While I do have some other mutual fund investments, my small (usually) but steady….pay myself first plan, has paid off for me wonderfully over the years. I took Buffett’s advice, and dollar cost averaged my purchases and then didn’t touch them. I might add that my yearly investments never exceeded the maximum that was allowed at the time for IRA’s. Even when you add my 403b for the yearly total combined for both. It is truly amazing what at one time was 160 a month, each and every month will add up to over that many years, increasing and compounding. Of course, I also have paid off everything and have no debt what so ever…..
    So considering what Trump started out with, I’d say percentage wise, I’m way ahead.

  • Samuel Robles

    Bankruptcy #5… Trump International Golf Club Puerto Rico just went belly up, (Coco Beach Golf & Country Club S.E., Rio Grande PR), leaving behind debts to the tune of 78M, including over 32M to the ailing Government Development Bank of Puerto Rico (Fomento).

    • Teddi

      Great timing as all of Puerto Rico is going bankrupt. 4-5 deals out of over 300 – are you kidding me ?
      Do you know what VC’s [ like myself ] look for out of every 5 deals ?
      You are clueless….

      • SherrieL

        Oh, look, it’s a Trump-bot! How cute! And after all of that “you’re clueless!” witty rejoinder, you are, where, on the Forbes list? ……crickets……(if we’re lucky, if not, more empty braggadocio).

      • tdsutter

        Teddi, help me to understand. If you are an expert in this field, why is it necessary to speak so harshly? You appear very angry and hurt.

        • Bill Owen

          Teddy is angry because he got drunk and shot a hole in the roof of his trailer. Again.

  • Kent

    After 4 bankruptcies, ALL of Trump’s money is actually somebody else’s. Just because you legally get rid of debt doesn’t mean you deserve what you have.

    • speaksthetruth

      Please say that again!!!! It’s all someone else’s money– our money.

    • Teddi

      Out of all the deals he has done ? You have NO concept of business – none, zip, zero !

    • Theblackirish

      He has over 500 companies and 4 went bankrupt during the 2008 financial crisis. STFU and learn what you’re talking about.

      • Stacy Johnson

        Actually, none went bankrupt during the financial crisis.

  • Mold Pro

    One thing this article doesn’t account for is taxes. I am sure Trump has been paying at least some taxes on sale transactions along the way. If you take the S & P example the difference between 500M and 20B would be taxed at the long term capital gains rate upon the sale which would not make the difference anywhere near 10B.

    • Amy Livingston

      The comparison is still valid. Minimizing the amount you pay in taxes should be part of any investment strategy – and the Donald, by choosing to invest heavily in real estate, is doing a lousy job of it.

      • Mold Pro

        You completely missed the point of my post. Whatever taxes Trump did or did not pay have already been paid and thus his net worth reflects that. My point is that the author of this article doesn’t take into account the taxes one would have to pay by investing in the S&P Index fund upon the sale of those holdings over the same period of time given the gains the fund has seen. Its not an opinion or a “strategy” it’s simply a fact that was not accounted for in this piece. Good luck on your financial “strategy”…sounds like your a real wiz!

        • ghortej

          Long term capital gains taxes max out at 15%. So assuming Trump paid 15% on the full $20 billion, which comes to $3 billion, he’s be left with $17 billion.

          After taxes, Trump would still have 70% or $7 billion more than he claims to currently be worth.

          • Mold Pro

            Thank you for supporting my point! It would be $20B-$500M=$19.5B in LT gains at the 15% so the author should have accounted for taxes in the S&P portion of the article.

        • Steven Bannister

          Good point. Nor does the author take into account the cost of housing, food and other living expense for himself and his family. This whole hypothetical scenario is based on 100% of all Trump’s money being dumped into the S&P500 and left untouched- not to mention Trump owning a crystal ball which would tell him how well the S&P 500 would perform over the next 30 plus years! Hindsight is always 20/20!

          Today, instead of owning stock (which would need to be liquidated to be spent) Trump currently owns a large portfolio of extremely valuable real estate (skyscrapers, hotels, casinos) all over the world that produce a cash flow of $400 million PER YEAR. Overall, I’d say he outperformed the S&P 500 and then some.

          • mmortal03

            I thought the same thing, that he would have had to live off of some of it, and that would depend on his lifestyle, quite likely spending at least half of what he made, but they also gave him all the benefits of the doubt in terms of the calculations. Also, time is money, so his money would’ve been passively working for him, rather than him having to actively do real estate deals.

            What it definitely shows is that even someone as knowledgeable about real estate has he is couldn’t actually beat the overall market, so most people definitely shouldn’t be trying.

    • tdsutter

      Not only does it not account for taxes, it doesn’t account for any “draw”. In other words, if you or I or The Donald or Warren, for that matter would have invested our entire net worth in 1982, in 2015 we would not have what the article suggested because we’d need to “draw” to cover taxes and other living expenses.

    • Thomas Bartel

      I crunched the numbers for you. A sell off in 2014 while living in New York would have resulted in over $10 billion in taxes

  • Amy Livingston

    And some folks want to hand the federal budget over to this guy?

    • bigpinch

      Sorry, but the budget is a function of Congress. The President of the United States proposes a budget, every year, but Congress can tell him to “go pound sand.,” if they don’t like it.
      The Main Stream Media and the Democrats like to blame President Reagan for the increase in the National Debt during his administration and then strut and crow about how President Clinton left us with a (fantasy) balanced budget which George W. Bush destroyed just a few years later. That is just so much crap it isn’t worthy of arguing one way or another.
      It should be evident, by now, that doubling of the National Debt under Barack Obama could only be accomplished by collusion between Republicans and Democrats in Congress. Anyone who doesn’t understand that isn’t worth talking to.

      • Philip James

        The unbelievable amount of bullshit you posted shows you are hardly worth talking to.

        • bigpinch

          Is that all you got?

          • Philip James

            No, but it’s all you’re worth.

          • bigpinch

            Nice grade-school remark, dumbbell. But, unfortunately for you, snappy come-backs are no substitute for knowing what you’re talking about. Now, go tie your shoes, if you know how.

      • Amy Livingston

        Sure they can, but the proposed budget is always the starting point, and I don’t want to know what The Donald’s would look like.

  • Ted

    he starts the Art of the deal saying he doesn’t do it for the money, but does it to do it. He likes building things and being in charge of a giant organization that employs tens of thousands, and he knows it’s easy to make money on the stock market, but he doesn’t respect the people who did that, because they did nothing to build the United States

  • tz1

    It means if Trump had the genius of timing the market getting in at the bottom. In 1982 the market was at the SAME LEVEL it was in 1966. ZERO RETURN. Same if you started in 1929, it would be 1950 before you broke even. BROKE EVEN, not even a gain.
    He could have made far more money safely by buying 30 year treasuries paying 16+ in 1982, in 2012 he would have a completely safe 16% compounded return. Who do you know did that?
    Timing is everything.
    What if you started in 2000? 2008?

  • bigpinch

    Let’s all cry over Trump’s diminished fortunes which are probably million times greater than the author of this nonsense.

  • Tom

    I’m sure he will blame Mexicans or Muslims or monetary policy for his failure to maximize his opportunities. If only there had been a wall….

  • obamathemarxist

    What do you expect from a website that glorifies socialism, this website won’t expose the corruption of the Clinton Foundation, a far more important matter than how Trump handles his money.

  • Robert L

    The commenters are such chumps, all cool with their barista jobs and law degrees, living with mom and dad and watching porn to date. The Donald can make money in many ways, while these bozos are busy paying attention to him while having no life and playing with themselves.

    • Donnie ReiIIy

      Aren’t you a commenter here and therefore also a chump by your own standard? Also, where is the restroom? lol I don’t drink starbucks

      • Robert L

        Your point being ? Perhaps you drink soda with a straw or can’t afford a cup of coffee. As for me being a chump, in the insult department, you are smug and clearly out of your league. It’s Monday, maybe continue looking for a job and get off the EBT.

        • Donnie ReiIIy

          LMAO at that defensive response! My point being that you’re whining about other people’s behavior while doing the exact same thing, in typical tone-deaf hypocrite fashion.

          BTW, what’s wrong with drinking through a straw? I believe this establishment serves a range of iced fruit and frappé-type beverages, I guess you’re new here? Gotta start somewhere! What’s my total, Bob?

  • John L

    This article is cherrypicking based on the ’87 crash.

    “If someone were to invest $40 million in a S&P 500 index in August 1974, reinvest all dividends, not cash out and have to pay capital gains, and pay nothing in investment fees, he’d wind up with about $3.4 billion come August 2015, according to Don’t Quit Your Day Job’s handy S&P calculator. If one factors in dividend taxes and a fee of 0.15 percent—which is triple Vanguard’s actual fee for an exchange-traded S&P 500 fund—the total only falls to $2.3 billion.

    It’s hard to nail down Trump’s precise net worth, but Bloomberg currently puts it at $2.9 billion, while Forbes puts it at $4 billion. So he’s worth about as much as he would’ve been if he had taken $40 million from his dad and thrown it into an index fund.”

  • Anthony

    So the author is saying that it’s better not to work for your money? Just sit home and collect?

    • Amy Livingston

      Well, it’s nice work if you can get it…

  • Thomas Bartel

    I ran these numbers thru a capital gains tax calculator as if Trump had invested as the money and then withdrew all cash in 2014 while living in New York. As you can see his total capital gains tax exceeds $10 billion. This article is just an advertisement for Vangurad wich is Hillary Clinton’s lone investment and liberal properganda. It took me 15 minutes to do the research and debunk this article. I gladly will take on the next liberal lie as soon as it come.
    #Truth #Trump2016 #Hillary2016

  • Mark

    Bullshit! Chump got as “small loan of $1,000,000 from his dad, had constant mentoring, and inherited from his father when he died. HARDLY a “self made man”. He is heavily leveraged and his true wealth is “soft”.

    • Rolando

      how much leverage does he employ?

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