While thinking about my own net worth recently, I came upon this fun Gawker article titled “Donald Trump’s Grossly Exaggerated Net Worth: A Timeline.”
There is certainly much that can be said about the real estate mogul and Republican presidential candidate, whether you want to talk about his politics, his ego, or his hair.
Today, I’d like to focus on one his very favorite topics — his money.
Trump is undoubtedly a very rich man. Not content to rest upon the wealth he was born into — his father and one-time boss Fred Trump was also a real estate developer worth hundreds of millions — the younger Trump expanded the family business across Manhattan and around the world, and he widened his personal brand to include everything from television shows and beauty pageants to books and bottled water.
All that hard work appears to have paid off. When Trump first went public with his net worth in 1988, it was $700 million. By the time he announced his candidacy in June, he claimed that he was worth $8.7 billion.
But did Trump’s earnings perform better than index funds?
Of course, there are plenty of other business ventures Trump could have gotten into over those 27 years.
One choice would have been for him to do nothing at all. Trump could have taken the $700 million he started with, invested it in a completely boring way, and read books or learned to macramé. But how much would all this laziness have cost him?
The most boring way I know to invest is simply by buying low-cost, passively managed mutual funds that track a market index like the S&P 500.
So, suppose instead that Trump had put 90 percent of that $700 million into VFINX, which tracks domestic stocks, and he put the other 10 percent into VBFMX, which tracks domestic bonds. Then suppose he set up his account to automatically keep that ratio at 90-10 stocks to bonds.
VFINX increased by a factor of thirteen over that time and VBFMX by a factor of five. This boring portfolio would have left Trump with a net worth slightly higher than $8.7 billion — not bad for sitting on his couch that whole time.
What that means for you
So what should be your takeaway from all this?
I don’t think it says too much about Mr. Trump — other than that if you have an opportunity to start with $700 million then you should probably take it.
Rather, it’s just another reminder that you should get started investing as early as possible because the power of compounding your gains is so important — as important, say, as 30 years of hard work and risk-taking.
And for me, after a frustrating couple months of bad returns, it served as a good reminder that an aggressively allocated portfolio remains the right answer for accruing wealth in the long term.
Thanks everyone and have a great weekend 🙂