As you are all aware, Donald Trump is a billionaire real estate tycoon in USA and is currently running as one of the presidential candidates.
Donald Trump father was a multimillionaire New York real estate developer who left him a fortune which was estimated at $500 million in 1982.
Over last 4 decades, Trump has developed his father’s business to a grand level and has a current net worth of $10 billion.
He has grown his father’s real estate empire during the last 33 years at an annualised return of 9.5% or multiplying wealth by 20 times.
During the above period, to achieve this return, he took excessive risks and due to excess leverage, he has filed four corporate bankruptcies. In nut shell, he made this return by taking undue risk with great difficulty.
During the same period, S&P 500 (an index of 500 of America’s largest companies) has provided an annualised return of 11.86% or multiplied wealth by 40 times.
By simply investing $500 million in S&P 500 index in 1982 and doing nothing whatsoever for last 33 years, would have made Donald Trump’s net worth at $20 billion instead of the $10 billion he has today.
His opportunity loss of investing in real estate instead of equity is $10 billion or Rs.64,000 crores.
This is yet another example of how equity is a much better asset class than real estate in the long run.