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Comment by mbrock | Hacker News Reader

http://www.moneytalksnews.com/why-youre-probably-better-inve...

"Imagine Trump had retired in 1982, sold his real estate holdings and invested his $500 million in the S&P 500 — that is, 500 stocks representing the American stock market.

"From 1982 through the end of 2014, the S&P 500 index had an annualized return, including reinvested dividends, of 11.86 percent, according to MoneyChimp’s S&P 500 Compound Annual Growth Rate calculator.

"Per this calculator, every dollar invested in January 1982 would have been worth $40 by December of 2014. That means Trump’s initial $500 million would have grown to $20 billion. That’s twice what Trump says he’s worth today."

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It's of course even more drastic when you consider that the two (arguably) most authoritative sources on billionaire wealth measurement - Forbes [1] and Bloomberg [2] - consider Trump to be worth closer to $3 or $4 billion. He exaggerates his brand's value by about $6 billion.

[1] http://www.forbes.com/sites/erincarlyle/2015/06/16/trump-exa...

[2] http://www.bloomberg.com/politics/articles/2015-07-28/here-s...

This calculation seems to ignore slippage. Donald Trump can't drop $500M into the S&P and get the same price per share that I can get if I drop $5k into it.

Yes he can, or at least nearly the same price with very little slippage.

The S&P is not a single illiquid penny stock but a collection of 500 of the most liquid investments in the world, and 500 million dollars is a pittance compared to its capitalisation even back in the 80s. Sure, if he had to invest it in half an hour he would move markets - but if he had a year? No slippage from adding 2m a day distributed over 500 stocks...

It also assumes he consumed zero dollars from then til now. If he wanted to have a wealthy lifestyle, and can you really blame him, these passive returns drop quickly.

If you subtract 15% capital gains taxes every year, this 'only' comes out to $12 billion. (Which is why billionaires hate taxes.)

Those taxes only apply if you sell though. If not, you get the full $20B, less 15% at the end (i.e. $17B) if you decide to quit cold turkey and convert it all to cash on the final day.

You only pay capital gains taxes when you realize gains, not every year.

Trump would pay 15% of $20B = ~$3B, so his net worth would be $17B. And this is assuming that his stock investments don't pay qualified dividends that are reinvested. So, yeah, he'd have much more than $12B.

If you buy a stock and hold it, you don't have to pay capital gains along the way. But if you buy a mutual fund and hold it, capital gains will pass through to you whenever the manager sells stocks to adjust the portfolio. There are "tax efficient" mutual funds whose mission is to minimize that churn, but no fund can keep it at zero. I don't know how many tax efficient mutual fund options there were in 1982.

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