Yeah, most billionaires have no idea what they're talking about. All luck. Yup.
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Another thing bothers me: you're supposed to look at risk/return, not simply return, in evaluating investment strategy.
No. How much wealth could those individuals create if they couldn't sell the companies on the market and invest that money, and had instead to accumulate dividends? The relationship is symbiotic.
Yes, Trump created wealth, but the point is that his peers would have created even more if he hadn't used that money himself. To make an analogy, I can swim a few laps, but you wouldn't want to have me replace Michael Phelps on your team.
His father, Fred Trump, built a real estate empire of 27.000 apartments in Brooklyn and Queens. Just sitting on those and maintaining and expanding it would have resulted in a fortune many times bigger than he has today.
The bigger point I want to make is that the standard deviation on returns of a single venture like Trump's is so large that you cannot meaningfully compare it to a highly-diversified basket of stocks.
To use your analogy, it'd be like evaluating the effectiveness of a coach in a swimming event by picking a single one of their swimmers and comparing them to the average times of the U.S. Olympic team. Does this necessarily imply anything at all about the skill of the coach?
I disbelieve (1) because of his multiple high-profile bankruptcies.
And they, on average, would have done a little better than Trump did.
> Treatment of IPOs. Initial public offerings should be seasoned for six to 12 months before being considered for addition to an index.
So if the S&P 500 explicitly excludes equities to IPO into the index, then how is it that an investor in an S&P 500 index is delegating wealth creation? They're just trading the returns with other investors. And to be clear, this is totally great for the investor! But it shouldn't be confused with actual business.
[1]: https://us.spindices.com/documents/methodologies/methodology...
Because that doesn't change the point. They could delegate further if appropriate.
But one way or another, those mature companies create wealth. (If they did not, the S&P 500 index would not rise.)
If I'm an investor that buys at IPO time, how many companies am I willing and able to invest in if I have to wait for the profits to come in through yearly dividends? And so, if I'm a VC, how many companies am I willing and able to invest in if the IPO market is much smaller? And so, if I'm an entrepreneur, how many companies can I found and create value from if I have very little chance of selling them off?
The index funds are the terrain that sustain the "wealth creators".
After all an index fund is basically just the average of all of the investments inside it.
Great respect to all who went out and built something great. Trump is not one of them; he would be penniless if his dad hadn't rushed in and saved him on at least two separate occasions.