Author Topic: Index Fund could've made Donald a Billionaire  (Read 5466 times)

MasterStache

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Proud Foot

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Re: Index Fund could've made Donald a Billionaire
« Reply #1 on: March 30, 2016, 01:08:22 PM »
From a distant view the premise of the article is very much true.  What I would be interested in, the article doesn't mention that it is included, would be how much he has pulled each year for expenses.  Saying his actual current NW is $4b vs the calculated numbers if he had invested his $200m in 1974, 82, or 88 does not show the full picture.  If his investments return 15% annually but he pulls out 12% the net of 3% will be less than the S&P500 and the difference will compound resulting in a large difference over the years.

I have no idea what the cash flows he pulled out each year, if any, are but would be interested in an analysis that includes all of these cash flows rather than looking at the beginning and ending net worth numbers and comparing to an investment that reinvests dividends and does not get touched.   

slugline

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Re: Index Fund could've made Donald a Billionaire
« Reply #2 on: March 30, 2016, 01:25:57 PM »
Yes, I would like to see what the S&P-vs-Trump numbers would look like after figuring in "spending like Trump" too. :)

Vagabond76

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Re: Index Fund could've made Donald a Billionaire
« Reply #3 on: March 30, 2016, 02:22:18 PM »
Another thing:  funds with a 0.15% expense ratio didn't exist in 1982.  Not even index funds had expenses that low.  Everything had high loads and/or high expense ratios.

YoungInvestor

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Re: Index Fund could've made Donald a Billionaire
« Reply #4 on: March 30, 2016, 02:55:57 PM »
The dollar amount would be different, maybe even after factoring in spending, but honestly, he gets much more utility from his empire than he would from having a lot of money at vanguard.

Jack

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Re: Index Fund could've made Donald a Billionaire
« Reply #5 on: March 30, 2016, 03:15:49 PM »
Another thing:  funds with a 0.15% expense ratio didn't exist in 1982.  Not even index funds had expenses that low.  Everything had high loads and/or high expense ratios.

When your investable assets are large enough (as Trump's are/were), it's worth it to construct your own index by buying the underlying individual stocks. First of all, expense ratios scale with the fund balance but trade commissions are typically a fixed price unrelated to the number of shares in the transaction. Second, having a large account balance makes it easy to find brokerages willing to offer a bunch of free trades as a perk.

MustacheAndaHalf

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Re: Index Fund could've made Donald a Billionaire
« Reply #6 on: March 30, 2016, 04:24:13 PM »
(Disclaimer: I dislike Donald Trump and agree he invests worse than the S&P 500.  But the article has a flaw, so keep in mind I'm focusing on just that.  Trump Campaign, I will not speak at a rally!)

"If someone were to invest $40 million in a S&P 500 index in August 1974 ..."
http://www.vox.com/2015/9/2/9248963/donald-trump-index-fund

Slight flaw: it didn't exist.  Nobody could buy into an S&P 500 index fund until late the next year.

"Bogle started the First Index Investment Trust on December 31, 1975 ..."
"Bogle's fund was later renamed the Vanguard 500 Index Fund."
https://en.wikipedia.org/wiki/Index_fund

And when John Bogle started that fund, almost everyone ridiculed it ("Bogle's Folly").  The article's author is showing a hindsight bias in thinking today's reasonable idea (S&P 500 index fund) was just as reasonable decades ago.  It made less sense to most people than Trump does today, sadly.  On both counts.

iris lily

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Re: Index Fund could've made Donald a Billionaire
« Reply #7 on: March 30, 2016, 04:30:47 PM »
(Disclaimer: I dislike Donald Trump and agree he invests worse than the S&P 500.  But the article has a flaw, so keep in mind I'm focusing on just that.  Trump Campaign, I will not speak at a rally!)

"If someone were to invest $40 million in a S&P 500 index in August 1974 ..."
http://www.vox.com/2015/9/2/9248963/donald-trump-index-fund

Slight flaw: it didn't exist.  Nobody could buy into an S&P 500 index fund until late the next year.

"Bogle started the First Index Investment Trust on December 31, 1975 ..."
"Bogle's fund was later renamed the Vanguard 500 Index Fund."
https://en.wikipedia.org/wiki/Index_fund

And when John Bogle started that fund, almost everyone ridiculed it ("Bogle's Folly").  The article's author is showing a hindsight bias in thinking today's reasonable idea (S&P 500 index fund) was just as reasonable decades ago.  It made less sense to most people than Trump does today, sadly.  On both counts.

You are right, it is  slight.

The Donald took his inherited millons and built things, made companies, moved product. All of that directly employed people, gave them a paycheck, enabled them to buy stuff. Good for our ecnomy and cr,the country.

While I am never one to shout ill tempered things at financial investors who "hold the economy back" by hangong onto their momey in fnancial instruements, I do think that directly sowing money into a variety of economies (nt only the U.S.) as Trump has done, is a good thing.


forummm

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Re: Index Fund could've made Donald a Billionaire
« Reply #8 on: March 30, 2016, 04:42:45 PM »
(Disclaimer: I dislike Donald Trump and agree he invests worse than the S&P 500.  But the article has a flaw, so keep in mind I'm focusing on just that.  Trump Campaign, I will not speak at a rally!)

"If someone were to invest $40 million in a S&P 500 index in August 1974 ..."
http://www.vox.com/2015/9/2/9248963/donald-trump-index-fund

Slight flaw: it didn't exist.  Nobody could buy into an S&P 500 index fund until late the next year.

"Bogle started the First Index Investment Trust on December 31, 1975 ..."
"Bogle's fund was later renamed the Vanguard 500 Index Fund."
https://en.wikipedia.org/wiki/Index_fund

And when John Bogle started that fund, almost everyone ridiculed it ("Bogle's Folly").  The article's author is showing a hindsight bias in thinking today's reasonable idea (S&P 500 index fund) was just as reasonable decades ago.  It made less sense to most people than Trump does today, sadly.  On both counts.

Even if you couldn't invest in an S&P 500 index fund, you could create your own. With $40 million, your "ER" would be much lower than 0.05%. Just buy the S&P500 weighting of the top 500 stocks and reinvest the dividends. Your trading would only be to buy new shares once per quarter, or selling something if it dropped out of the index (or you could just choose to hang on to it anyway).

Vagabond76

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Re: Index Fund could've made Donald a Billionaire
« Reply #9 on: March 30, 2016, 04:47:28 PM »
Another thing:  funds with a 0.15% expense ratio didn't exist in 1982.  Not even index funds had expenses that low.  Everything had high loads and/or high expense ratios.

When your investable assets are large enough (as Trump's are/were), it's worth it to construct your own index by buying the underlying individual stocks. First of all, expense ratios scale with the fund balance but trade commissions are typically a fixed price unrelated to the number of shares in the transaction. Second, having a large account balance makes it easy to find brokerages willing to offer a bunch of free trades as a perk.

Again, cheap (or free) trade commissions is the rule today when placing orders over the Internet. All the way up to the mid-1990s commissions were on stock trades were a percent of the order.

Paul der Krake

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Re: Index Fund could've made Donald a Billionaire
« Reply #10 on: March 30, 2016, 06:42:29 PM »
Oh come on. Look, Trump is a despicable character in many ways and some of his businesses don't pass the smell test, okay.

The comparison is still ridiculous. The man has a spending that rivals that of Saudi princes and the entire budget of small towns. He has a gold plated 757 and a crew just to move him around.

He has trounced every index fund under the sun, no ifs and buts.

forummm

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Re: Index Fund could've made Donald a Billionaire
« Reply #11 on: March 30, 2016, 07:17:41 PM »
Oh come on. Look, Trump is a despicable character in many ways and some of his businesses don't pass the smell test, okay.

The comparison is still ridiculous. The man has a spending that rivals that of Saudi princes and the entire budget of small towns. He has a gold plated 757 and a crew just to move him around.

He has trounced every index fund under the sun, no ifs and buts.

Sort of. But I think comparing Trump's wealth to an index fund is also not a great comparison because he doesn't use his capital to make money. He makes his money through marketing and licensing his brand. He doesn't own the sweat shops that make his clothing line. He doesn't own most of the buildings that say Trump on them. He sells his brand. He makes money from his swagger not by putting his dollars to work.

MasterStache

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Re: Index Fund could've made Donald a Billionaire
« Reply #12 on: March 31, 2016, 05:50:20 AM »
Oh come on. Look, Trump is a despicable character in many ways and some of his businesses don't pass the smell test, okay.

The comparison is still ridiculous. The man has a spending that rivals that of Saudi princes and the entire budget of small towns. He has a gold plated 757 and a crew just to move him around.

He has trounced every index fund under the sun, no ifs and buts.

Sort of. But I think comparing Trump's wealth to an index fund is also not a great comparison because he doesn't use his capital to make money. He makes his money through marketing and licensing his brand. He doesn't own the sweat shops that make his clothing line. He doesn't own most of the buildings that say Trump on them. He sells his brand. He makes money from his swagger not by putting his dollars to work.

This^

My intention wasn't to compare his "empire" vs simply investing in the market from a detailed perspective. That would require a bit more than a one page summary. I realize it's not a true comparison. I just found humor in the article. That is all.

forummm

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Re: Index Fund could've made Donald a Billionaire
« Reply #13 on: March 31, 2016, 06:46:13 AM »
I think the Vox piece is useful in that it shows how glorifying the rich as being brilliant is often pretty dumb. If you are handed a huge amount of money from your parents it can be incredibly easy to get even more insanely rich just letting it work for you and not screwing up. Nearly all the billionaires in the country had incredible good luck on top of being born into privilege. Many of them also worked very hard and made good decisions. But they only got super rich because of their head start. I would say that Buffett is one of the closest to "self-made" on the list, and Buffett got his start because his dad was a congressman and the family had a bunch of money of their own (that he could practice investing starting from a young age) and rich friends that invested in his partnership as he got a little older. The 2 main Koch brothers inherited $300 million many decades ago (I haven't done the math, but they also would probably end up with about as much wealth as they have now if they'd left it in something like an index fund) and then blackmailed their other brother into handing over his inherited share of the business to them (they were going to out him as gay). The examples of being born 3/4 to home base and ending up at home are legion.

MasterStache

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Re: Index Fund could've made Donald a Billionaire
« Reply #14 on: March 31, 2016, 07:50:05 AM »
If you are handed a huge amount of money from your parents it can be incredibly easy to get even more insanely rich just letting it work for you and not screwing up.

Haha, I told my wife the same thing last night. He was born with a silver spoon in his mouth. All he had to do was not screw it up. He could have taken on much less risk and simply dumped the money into index funds (or equivalents) and STILL ended up a multi-billionaire.   

forummm

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Re: Index Fund could've made Donald a Billionaire
« Reply #15 on: March 31, 2016, 09:06:28 AM »
If you are handed a huge amount of money from your parents it can be incredibly easy to get even more insanely rich just letting it work for you and not screwing up.

Haha, I told my wife the same thing last night. He was born with a silver spoon in his mouth. All he had to do was not screw it up. He could have taken on much less risk and simply dumped the money into index funds (or equivalents) and STILL ended up a multi-billionaire.   

And he would probably have even more money if he hadn't lost so much on those failed deals. And it would have improved his image to not have all those failures hanging around. He could just have done his braggy face-of-the-project marketing schtick, had the money roll in, and watch his index funds grow.

Quote from Trump in the 90's, pointing to a homeless man:

Quote
See that bum? He has a billion dollars more than me.

Metric Mouse

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Re: Index Fund could've made Donald a Billionaire
« Reply #16 on: March 31, 2016, 08:42:07 PM »
(Disclaimer: I dislike Donald Trump and agree he invests worse than the S&P 500.  But the article has a flaw, so keep in mind I'm focusing on just that.  Trump Campaign, I will not speak at a rally!)

"If someone were to invest $40 million in a S&P 500 index in August 1974 ..."
http://www.vox.com/2015/9/2/9248963/donald-trump-index-fund

Slight flaw: it didn't exist.  Nobody could buy into an S&P 500 index fund until late the next year.

"Bogle started the First Index Investment Trust on December 31, 1975 ..."
"Bogle's fund was later renamed the Vanguard 500 Index Fund."
https://en.wikipedia.org/wiki/Index_fund

And when John Bogle started that fund, almost everyone ridiculed it ("Bogle's Folly").  The article's author is showing a hindsight bias in thinking today's reasonable idea (S&P 500 index fund) was just as reasonable decades ago.  It made less sense to most people than Trump does today, sadly.  On both counts.

You are right, it is  slight.

The Donald took his inherited millons and built things, made companies, moved product. All of that directly employed people, gave them a paycheck, enabled them to buy stuff. Good for our ecnomy and cr,the country.

While I am never one to shout ill tempered things at financial investors who "hold the economy back" by hangong onto their momey in fnancial instruements, I do think that directly sowing money into a variety of economies (nt only the U.S.) as Trump has done, is a good thing.

This is a good point. I don't look at the skyline of NYC and think "wow, what if all the money that went into this place had been put into an index fund..."  For better or worse, the Trump family has changed at least the skyline of one of the greatest cities on earth.

YoungInvestor

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Re: Index Fund could've made Donald a Billionaire
« Reply #17 on: April 01, 2016, 07:57:02 AM »
If everyone was only buying a bunch of index funds instead of investing in new businesses, there would be no companies in those index funds.

forummm

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Re: Index Fund could've made Donald a Billionaire
« Reply #18 on: April 01, 2016, 09:12:15 AM »
(Disclaimer: I dislike Donald Trump and agree he invests worse than the S&P 500.  But the article has a flaw, so keep in mind I'm focusing on just that.  Trump Campaign, I will not speak at a rally!)

"If someone were to invest $40 million in a S&P 500 index in August 1974 ..."
http://www.vox.com/2015/9/2/9248963/donald-trump-index-fund

Slight flaw: it didn't exist.  Nobody could buy into an S&P 500 index fund until late the next year.

"Bogle started the First Index Investment Trust on December 31, 1975 ..."
"Bogle's fund was later renamed the Vanguard 500 Index Fund."
https://en.wikipedia.org/wiki/Index_fund

And when John Bogle started that fund, almost everyone ridiculed it ("Bogle's Folly").  The article's author is showing a hindsight bias in thinking today's reasonable idea (S&P 500 index fund) was just as reasonable decades ago.  It made less sense to most people than Trump does today, sadly.  On both counts.

You are right, it is  slight.

The Donald took his inherited millons and built things, made companies, moved product. All of that directly employed people, gave them a paycheck, enabled them to buy stuff. Good for our ecnomy and cr,the country.

While I am never one to shout ill tempered things at financial investors who "hold the economy back" by hangong onto their momey in fnancial instruements, I do think that directly sowing money into a variety of economies (nt only the U.S.) as Trump has done, is a good thing.

This is a good point. I don't look at the skyline of NYC and think "wow, what if all the money that went into this place had been put into an index fund..."  For better or worse, the Trump family has changed at least the skyline of one of the greatest cities on earth.

Donald Trump didn't have too much impact on the skyline of NYC. What fraction of the big buildings there did he personally develop (developed, not licensed his name to be the brand of the building that some other developers developed)? <1%? <0.1%? His dad was a real successful developer though, so by saying "family" that makes the number higher--but still probably less than a percent.

If everyone was only buying a bunch of index funds instead of investing in new businesses, there would be no companies in those index funds.

The point isn't that no one should be investing outside of index funds. It's that Trump wasn't the huge success as a developer that he claims. He was average overall--and that breaks down into terrible as a developer and great as a marketer.

Scandium

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Re: Index Fund could've made Donald a Billionaire
« Reply #19 on: April 01, 2016, 12:03:52 PM »
(Disclaimer: I dislike Donald Trump and agree he invests worse than the S&P 500.  But the article has a flaw, so keep in mind I'm focusing on just that.  Trump Campaign, I will not speak at a rally!)

"If someone were to invest $40 million in a S&P 500 index in August 1974 ..."
http://www.vox.com/2015/9/2/9248963/donald-trump-index-fund

Slight flaw: it didn't exist.  Nobody could buy into an S&P 500 index fund until late the next year.

"Bogle started the First Index Investment Trust on December 31, 1975 ..."
"Bogle's fund was later renamed the Vanguard 500 Index Fund."
https://en.wikipedia.org/wiki/Index_fund

And when John Bogle started that fund, almost everyone ridiculed it ("Bogle's Folly").  The article's author is showing a hindsight bias in thinking today's reasonable idea (S&P 500 index fund) was just as reasonable decades ago.  It made less sense to most people than Trump does today, sadly.  On both counts.

You are right, it is  slight.

The Donald took his inherited millons and built things, made companies, moved product. All of that directly employed people, gave them a paycheck, enabled them to buy stuff. Good for our ecnomy and cr,the country.

While I am never one to shout ill tempered things at financial investors who "hold the economy back" by hangong onto their momey in fnancial instruements, I do think that directly sowing money into a variety of economies (nt only the U.S.) as Trump has done, is a good thing.

This is a good point. I don't look at the skyline of NYC and think "wow, what if all the money that went into this place had been put into an index fund..."  For better or worse, the Trump family has changed at least the skyline of one of the greatest cities on earth.

Donald Trump didn't have too much impact on the skyline of NYC. What fraction of the big buildings there did he personally develop (developed, not licensed his name to be the brand of the building that some other developers developed)? <1%? <0.1%? His dad was a real successful developer though, so by saying "family" that makes the number higher--but still probably less than a percent.

If everyone was only buying a bunch of index funds instead of investing in new businesses, there would be no companies in those index funds.

The point isn't that no one should be investing outside of index funds. It's that Trump wasn't the huge success as a developer that he claims. He was average overall--and that breaks down into terrible as a developer and great as a marketer.
To quote John Oliver; trump isn't a real estate genius, just a shitty lifestyle brand.

I thought his net worth was also a big unknown? In a court case he claimed his name was worth billions, and that was much of his NW?

forummm

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Re: Index Fund could've made Donald a Billionaire
« Reply #20 on: April 01, 2016, 01:03:37 PM »
To quote John Oliver; trump isn't a real estate genius, just a shitty lifestyle brand.

I thought his net worth was also a big unknown? In a court case he claimed his name was worth BILLIONS, and that was much of his NW?

FTFY

And yes. To be fair, since so much of his business value is directly related to the value of his brand (it's all marketing), it is reasonable to include the value of his brand in his NW. If he were to permanently tarnish his reputation (no idea how that could possibly happen....) he may have trouble making money at all.

talltexan

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Re: Index Fund could've made Donald a Billionaire
« Reply #21 on: April 05, 2016, 07:29:10 AM »
I thought the point of being wealthy was you could afford investments that are more fun and less efficient.


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