“I’m proud of my net worth. I’ve done an amazing job.” Donald Trump said during his June announcement that he planned to seek the presidency. As rich as Donald Trump is today, he could have been even richer with a lot less complexity if he had taken his eight figure inheritance decades ago and invested it into index funds instead of casinos and skyscrapers.
In an article for National Journal, reporter S.V. Date notes that in 1974, Trump’s share of his father, Fred’s real estate empire was worth about $40 million. If someone were to invest $40 million in a S&P 500 Index in August 1974, and reinvested all dividends, then one would have 2.3 billion in August of 2015 after dividend taxes and a fee of 0.15 percent (which is triple Vanguard’s actual fee for their S&P 500 exchange traded fund).
It is difficult to determine Trumps precise net worth. Bloomberg currently puts it at 2.9 billion. So he’s worth about as much as he would have been if he had taken the $40 million inheritance from his Dad and put it into an index fund.
But wait, if you compare Donald Trump’s performance since 1982 (the year in which the stock market took off after the early 80s recession) it doesn’t look so great. Forbes estimated that Trump was worth $200 million that year. If he’d put his money in an index fund that year at a 0.15 percent fee, he’d have $6.3 billion today after dividend taxes. That’s more than twice what Bloomberg estimates his current net worth is today. If he waited until 1988 and put his net worth into an index fund that year, an AP analysis found that he’d have $11.3 billion after fees and taxes.
As you can see, these calculations depend a lot on the exact day of the year you buy the index funds, what the size of the fee is and how much of the investment you take out for living expenses. However the exact numbers are not the point. The point is that Trump’s investment record is not really that impressive. It suggests that Trump’s success is almost entirely the result of having inherited $40 million from his father.
The bottom line is that you don’t have to be like Donald Trump to grow your investments. You don’t have to invest in casinos and skyscrapers. In fact, there is a good chance you can outperform Donald Trump by simply putting your money in low fee exchange traded funds from Vanguard. Visit Smart Investing to find out how you can grow your assets with elegant simplicity.