This morning on the Chris Plante Show on WMAL a caller complained that Trump inherited $200 million and that anyone could have $10 billion after 30 years, too, just by investing in a CD.
Chris Plante said "that's some CD"!
This meme is now ubiquitous in the media critical of Trump, and while not as obviously silly as this morning's example the critics nevertheless display remarkable investment ignorance.
Grant for a moment that Trump inherited $200 million, and keep in mind that that is the upper end of the estimates, which go as low as $40 million. Also keep in mind it's mostly real estate, not cash, not stocks, not bonds, a completely different business.
$200 million invested in the S&P 500 for 30 years from 1985 to 2015 yielded $4.2 billion, or just 42% of the net worth Trump claims to have accumulated over the period. The actual average nominal rate of return for the S&P 500 was 10.75% per annum, dividends fully reinvested. The $10 billion net worth claim, on the other hand, represents an annual net rate of return of 13.93%, again assuming the investment of $200 million, almost 30% better every year than what the S&P 500 actually yielded. But again, the S&P 500 return is not net. You still have to deduct taxes, inflation and expenses from that, which is an individual calculation and highly variable, and in New York can be quite onerous.
On the other end of the scale, the investment of $40 million becoming $10 billion is the equivalent of a net return of 20.21% per annum, 88% better than the S&P 500 nominal return every year on average.
The truth probably lies somewhere in between, but no matter how you cut it, Donald Trump capitalized on what he was given in a way which has been exceptionally more successful than what most people ever experience.
He's Yuge.
