Donald Trump and the Benefit of Financial Foresight


Donald Trump’s current net worth – as he would be the first to tell you – is estimated to be between $2 and $4 billion, most of which he made through inheritance and real estate investments, along with other business dealings. An article in National Journal recently took a look at what might have happened if he had invested in an S&P 500 index fund back in 1982 when his inherited real estate fortune was estimated to be worth “only” $200 million.  According to National Journal’s calculations, if he’d invested carefully in index funds, Trump’s net worth would be a whopping $8 billion today.

Does this mean Donald Trump is a bad investor? Not necessarily: the oldest lesson on Wall Street is that everything is easy in hindsight.

While highly speculative, those numbers do highlight the ongoing debate over which is a better investment – real estate instruments or stocks. Both stocks have and the real estate market have had great runs in recent history and, depending on when you invested, you could make cases for both investments being the better choice.

But the stock market and the real estate market both experience volatility, dips, and extended recovery times so, for the average investor, a portfolio composed of mainly real estate or other fixed assets (like art or collectibles, for instance) poses some risks that should be hedged with proper cash flow planning, a diversified portfolio, and proper tax planning.

Cash Flow Planning

A good financial plan takes into account how much cash you need access to, or may need access to in the future. Cash flow planning should be a key factor in deciding whether real estate investments are part your individualized financial strategy.

As National Journal points out, Trump claims he is willing to spend upwards of $1 billion of his own money to fund his presidential campaign, yet his financial disclosure statements show that he may have less than $200 million in cash, stocks, and bonds. The rest of his fortune is tied up in real estate investments, which could be much harder to liquidate and use for his campaign.

Most of us aren’t running for president but, if something like the 2007 housing collapse were to happen again, any investor who is predominantly invested in real estate could have problems liquidating those – diminished – assets for retirement, college funding, or other non-presidential goals.

A solution: diversification.


Whether you are investing in real estate or the stock market, diversification is always a prudent way to address your own risk tolerance and use proper foresight in creating a winning strategy.

While with real estate funds, diversification can be achieved via many factors, including residential vs commercial investments, differing location focuses, and differing interest rates and financing mechanisms, it is still fundamentally one sector, subject to sentiment and swings.

With the stock market, on the other hand, diversification allows you the opportunity to invest not only in different asset classes, such as stocks, bonds, and money market funds, but in a variety of sectors and industries as well. Over the past 60 years, historically, the stock market has averaged an 8% annual return, so investors with strategically balanced and diversified portfolios, there is the opportunity for steady, while not spectacular gains, with the potential for less risk than investing only in the real estate market.

An investor who is properly diversified through multiple asset classes – including real estate if it makes sense for their own customized strategy – is potentially better protected against the short term results of one asset class experiencing a crash or a prolonged dip.


Another thing to consider is that options for investing in real estate in IRAs and other tax-deferred accounts are complicated and not every custodian will allow you to include real estate investments in a tax-deferred account.

Hindsight vs Foresight

While Donald Trump is an outlier because his high net worth shelters him from some of the issues with primarily being invested in real estate, it’s intriguing to consider “what if.”

In the case of a more typical investor, a little foresight can go a long way in making sure you are on your way to achieving your own financial goals. A sound financial plan should be tailored to individual goals and cash flow needs, with a customized cash flow plan, and diversified across multiple asset classes for the potential for steady and compounded growth over time.

Whether you are a Donald Trump with a large inheritance or a young professional just getting started, a solid plan and strategy puts the benefit of hindsight where it belongs: in a conversation over coffee or cocktails, and not as the basis for a winning investment strategy.

3 Winning Strategies Investing and Fantasy Football Share

Fantasy Football Goal

As the NFL season begins, millions of fantasy football fans are busy researching and drafting their teams. And this season, as in previous ones, fans will be wondering why some fantasy team managers just seem to have a knack for finding those sleepers and high upside players, while other managers routinely fail to understand and predict player value.

Investors often wonder the same thing: why do some investors consistently get it right and prosper, while others are lucky if they even break even?

Coincidence? Maybe, but there are several important things successful fantasy football managers have in common with successful real-life investors.

Here are three important mindsets that can help you go the whole 9 yards, whether it’s on the virtual gridiron or with your own financial plan.

Research the Players

A good fantasy football manager knows that you need to study all the different variables – including roster positions, draft picks, and expected performance – to build a winning team. Understanding the available options is critical to determining things like how many players you need at each position and which players you think will be the best.

This same principal applies to investing. A smart investor or financial advisor starts by understanding all the different variables, such as capital, types of investments, and asset classes. Understanding the pros and cons of various investment strategies is critical in determining how to choose a strategy that is the appropriate option for your own goals and needs.

Never count on a couple of stars to carry the team

When drafting your fantasy team, you always want to diversify your risk. You might not want to draft multiple offense players from the Green Bay Packers, for instance, even if that team is loaded with talent, because, if Aaron Rodgers and company have a bad week, your fantasy team will be struggling too. Smart fantasy managers build a stable foundation and don’t just count on rising stars.

When building your investment portfolio, risk diversification is critical as well. Wall Street is littered with stories of investors who put all their eggs in one “sure” basket, only to learn the lesson of diversification the hard way. Even if you’re extremely confident that a certain sector is a good bet, it’s usually better to diversify and limit your amount of exposure to individual sectors. That way, even if the sector doesn’t do as well as you had anticipated, your investments are distributed across other asset classes, and your risk should be better managed.

When the going gets tough, the tough stay disciplined

Anyone who has played fantasy football knows the danger of making a snap waiver wire decision you’ll regret later. On one hand, you don’t want to panic and drop your star player after a rough few weeks, only to see him rebound to a MVP-caliber season (and on someone else’s team!) On the other hand, just because an unproven player has a great week doesn’t mean he’s more valuable than the player you’d have to drop in order to acquire him.

When the market hits a volatile patch, it takes a disciplined investor to trust their plan and avoid making snap decisions about buying and selling. A look at the history of the stock market makes it abundantly clear that investors who take a long term view do better than those who shift their investment strategies with every changing wind. This doesn’t mean that any plan should be viewed as foolproof; a good investor or financial advisor knows the value of reassessing and recalibrating appropriately and strategically. What it does mean is that, when the going gets tough, a prudent investor takes the long view, stays disciplined, and sticks to a strategy.

It’s a long season

The only NFL team in history to have an undefeated season is the Miami Dolphins who finished 17-0 in the shorter 1972 season. No NFL team has gone 19-0 to date so it’s highly unlikely that any fantasy team will achieve perfection either. But that doesn’t mean you can’t have a great season and get smarter and smarter about putting together a winning team.

With investing too, there will always be ups and downs, touchdowns and penalties, fumbles and conversions, and a few Hail Mary’s. But with a solid game plan and clearly defined goal, you’ll be on your way to a putting together a strategy designed to stand the test of time and put you squarely where you want to be: heading toward your own end zone with your eye on the ball and your own goals in sight.