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I have seen several claims that Trump would be worth significantly more if he had just invested his father's money in an index.

I have made myself very rich

Bloomberg puts Trump's current net worth at $2.9 billion... if Trump had just put his father's money in a mutual fund that tracked the S&P 500 and spent his career finger-painting, he'd have $8 billion.
- Deborah Friedell, London Review of Books

Claims range anywhere 3 to 10 billion dollars that he is currently worth (upper range seems to just be his own imaginary assessment), and from 8 to 20 billion dollars that he would be worth if he just invested in a mutual fund.

  • How do you even evaluate his current net worth?
  • What is the best estimate of his current net worth?
    • The comments have mentioned it might not even be a billion dollars, but not backed that up with any citation.
  • How much money did he inherit?
  • How much money would he have made if he parked that money in an unmanaged index fund over that time?
Some Guy
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    Actually, I have seen credible claims that Trump is worth less than $1 billion. – Daniel R Hicks Feb 12 '17 at 05:40
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    I would like to see an Answer to "How do you even evaluate his current net worth?". Where does this info come from exactly. He rents out his name (as do Bell and Howell, and Polaroid) and claims his name is thus worth hundreds of millions. – Keith McClary Feb 12 '17 at 05:41
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    @KeithMcClary - accounting term is "intangible asset" (which is basically what all brands are). And valuations of that are... less precise than might be desirable. – user5341 Feb 12 '17 at 18:43
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    Matt Levine wrote a [thorough takedown](https://www.bloomberg.com/view/articles/2015-09-03/should-donald-trump-have-indexed-) of this claim. (In case you are lazy to read, the biggest problem is that the calculation assumes Trump would have invested all his wealth in the exact moment which we now, with the benefit of 40 years hindsight, know to be the most advantageous one. So yes, if Trump could see into the future, he could be richer know. That's not a reasonable baseline for having good business skills.) – Tgr Feb 12 '17 at 23:06
  • Is he listed? If he had done that, the mutuals may not have invested in him, which would skew the result one way or the other. – user207421 Feb 13 '17 at 01:05
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    @DanielRHicks many people would consider him as a liability rather than an asset. American phraseology of someone's "worth" is always troubling me. – Antzi Feb 13 '17 at 02:01
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    @Antzi - I was using the term "worth" in the conventional sense of "net financial worth" -- basically the total value of all financial assets minus all financial liabilities. – Daniel R Hicks Feb 13 '17 at 02:11
  • To invest money you actually have to have it. If your claimed fortune consists of real estate, much of which was financed by borrowing, you may not have much actual cash to invest in anything. – RedSonja Feb 14 '17 at 12:35
  • I'd be quite curious how this claim is affected by the Times investigation into trumps taxes and their claims that that trumps father apparently fed him quite a bit of money through numerous means, which wasn't known/alleged at the time of this question being asked. If only I had a notable claim to ask a follow up question on the topic :). – dsollen Jan 04 '19 at 21:42

1 Answers1

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Follow the citations

TL;DR: Politifact ruled the claim False.

Politifact found that Deborah Friedell was quoting Michael Antonio (who wrote Never Enough: Donald Trump and the Pursuit of Success) who was misquoting the National Journal. He sort of pushed the two quotes together, taking the parts that sounded best from both.

Or look at the source

The claim in the National Journal said:

Had the celebrity busi­ness­man and Re­pub­lic­an pres­id­en­tial can­did­ate in­ves­ted his even­tu­al share of his fath­er’s real-es­tate com­pany in­to a mu­tu­al fund of S&P 500 stocks in 1974, it would be worth nearly $3 bil­lion today, thanks to the mar­ket’s per­form­ance over the past four dec­ades. If he’d in­ves­ted the $200 mil­lion that For­bes magazine de­term­ined he was worth in 1982 in­to that in­dex fund, it would have grown to more than $8 bil­lion today.

First problem, that only gets him to $3 billion.

Second problem, to get to $8 billion, we have to take Donald Trump's wealth in 1982 and put it in a mutual fund. Not his father's.

Third problem, he'd have to sit on the money. He wouldn't have been able to spend any of it. Even modest withdrawals, starting in 1982, would have left him further and further off this pace. He certainly couldn't have funded the Trump lifestyle.

Fourth problem, this completely ignores taxes.

The bare argument of 1974 is based on Trump taking over managing the business in 1974. But that is not the same thing as transferring wealth. His father still owned the business from 1974 to 1999.

The National Journal is suggesting that when he took over management of the company, he could have liquidated and put the money into a mutual fund. If we assume that his share of the company was worth $40 million in 1974, then his share would have been worth $3 billion in 2015 (when the article was written). Of course, that neglects taxes and spending. Neither he nor his father could have taken an income from that money.

Taxes

I'm not going to do the math but here's a glance at taxes. The privileged capital gains rate of 15% doesn't date back continuously to 1974 and is the lowest rate during that time. The rate was more typically 20%, 28%, or 35%.

The estate tax in 1999 was 55% of amounts over $650,000.

A glance at the numbers

The same kind of estimates that put Donald Trump's wealth in the $3-5 billion range now put his father between $100 million and $300 million at the time of his death. The S&P 500 only grew from $1,248.77 on January 1st, 1999 to $2,316.10 now.

Brythan
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  • I've cleaned up the comments after the answer has been majorly edited. Please repost anything that is still relevant. – Sklivvz Feb 12 '17 at 23:30
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    This uses the wrong S&P 500 figures. It should use the S&P 500 Net Return, not Price figures. – Oddthinking Feb 13 '17 at 00:59
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    @Oddthinking I apologize. I accidentally sent that last comment before it was complete. In reality, none of the measures is appropriate. Even Net Return, which may be closest, isn't accurate because it assumes a tax rate that is much lower than the Trump portfolio would incur. – D Krueger Feb 13 '17 at 01:54
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    @DKrueger: Agreed, but we should give the claimant the best possible chance before declaring them wrong. Using the price-only figure is unfair to the claimant. – Oddthinking Feb 13 '17 at 01:57
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    The comments have seemed to cast a lot of doubt here. I'm curious if anyone else will venture an answer. – Some Guy Feb 13 '17 at 05:17
  • Did Fred Trump actually lead his company until his very last days? Otherwise DJT could've been taken the business over earlier, therefore period of hypothetical investment would be longer. – Szymon Feb 13 '17 at 11:49
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    @SomeGuy: Nah, our comments are bickering about small details. Politifact cover the big picture. – Oddthinking Feb 13 '17 at 12:15
  • @Oddthinking Correct. Specifically: using the price ignores dividends. Assuming reinvestment, there would be more shares in the portfolio than at the beginning. – JimmyJames Feb 13 '17 at 14:42
  • It seems you cast all the doubt on the counterfactual. But claims on his *actual* present wealth range wildly and seem in doubt. Is that just something you can't address without an audit? Because I feel like an answer to this question kind of needs to touch on both sides of the equation. – Some Guy Feb 13 '17 at 15:24
  • Taxes are only paid when you liquidate your investment. If he would have invested his fortune in an index or a mutual fund and stayed with it, he would have not paid any taxes. Also having his money invested would have not prevented him from working as a TV personality, having his own clothing line or licensing his name for various purposes - that's pretty standard practice for any celebrity these days so the argument that he wouldn't have income to live on is completely incorrect. – ventsyv Feb 13 '17 at 16:02
  • Another problem with your argument; Trump was given control of the Trump organization in 1971 so while his dad still owned it, Trump was running it. I'm assuming he inherited most of his father's fortune so if you want to measure his performance, you can start as back as 1971. – ventsyv Feb 13 '17 at 16:11
  • @Szymon As covered in the answer, Trump took over managing the business in 1974. That's explicitly covered both in the answer and in the National Journal source. Please at least read the answer before suggesting changes to it. And we aren't criticizing some generic claim but the specific claim in this image. Would he have had $8 billion if he had put his father's money in a mutual fund in '74 and spent his life fingerpainting? No, he would have had $3 billion even excluding taxes and withdrawals. – Brythan Feb 13 '17 at 17:04
  • @Brythan But $3 billion could still be significantly more than he is currently worth, no? Given the boldest estimate of his wealth listed in the comments anyway, that would still be a factor of 3x, and may indicate that even including withdrawals he would have done better. – Some Guy Feb 13 '17 at 17:41
  • @SomeGuy There is no reputable source claiming that he has less than the $2.9 billion that Bloomberg credited him. The two magazines (Fortune and Forbes) that do that kind of estimate put him at $3-4 billion in 2015. I didn't bother repeating that, as the claim says $2.9 billion. And again that ***IGNORES*** taxes and withdrawals. And saying he could have gotten a job or started a clothing line...that's not spending his time fingerpainting. Taxes alone would have knocked him down from $3 billion to $1 billion. And that requires calling the claim incorrect. – Brythan Feb 13 '17 at 17:49
  • Okay, it may be worth asking a separate question about his *present* net worth, but the commenter did not cite any credible source for that claim, so for now I will let it rest. – Some Guy Feb 13 '17 at 17:51
  • I'd be quite interested if this conclusion is still false given the Times investigation which alleges that Trump's father transferred a significant amount of wealth to Trump through various tax loopholes. – dsollen Jan 04 '19 at 21:46