“How To Beat Donald Trump At Making Money” is a “catchy title on an article in Forbes in early August. Contributor Erik Carter thinks Trump could have done better in the S&P500
Erik claims that following his method, Trump should not have $8.7 billion but rather $20 billion. He makes 5 points around the question of how to do it and none are beyond the reach of average investors. Save of course the starting with $200 million part.
It is difficult to argue with those ideas.
It is very easy, however, to argue with the idea that you can turn $200 million in $20 billion by investing in the S&P500 from 1982 to now. 32 years and 7 months ending 31 July 2015.
Eric claims that index, with dividends reinvested presumably, returned 11.86% for that period, more or less correct. I got 11.28% here.
He could have used a different start point I suppose, but the .58% is not the quibble. Here is the quibble:
If taxes averaged 10% throughout the period, the $7.7 billion becomes $5.4 billion.
If lifestyle is 10% of income, very low for Mr. Trump, the after tax $5.4 billion becomes $3.8 billion less divorce settlements.. Still rather nice, but a long way from $20 billion.
In a more pedestrian world, someone with $200,000 at the very beneficial end of 1982, with taxes at 10% of income and exactly zero withdrawals, will have now about $5.4 million. Starting at the end of 1986, less beneficial, would yield about $3 million.
The article really points out several things. None of which relate to beating Donald Trump.
What can we learn?
The world is fair. If it looks too good to be true, it is false. That alone should have twigged you to the insanity of the conclusion presented in the title of this story.
Subscribe to the daily MoneyFYI article at moneyfyi.wordpress.com, Follow on Twitter @DonShaughnessy or Contact: firstname.lastname@example.org
Don Shaughnessy is a retired partner in an international public accounting firm and is now with The Protectors Group, a large personal insurance, employee benefits and investment agency in Peterborough Ontario.