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Written by: Nigel Green | deVere Group
Donald Trump’s dramatic financial rise and fall over the years has been the subject of much media scrutiny.
From real estate mogul to reality TV star to US President, Trump has seen his wealth fluctuate wildly, often with great fanfare and sometimes, devastating loss.
His current predicament, a $454 million fraud verdict and the pressure of a shrinking financial cushion, brings to light an interesting question: Could Trump have avoided some of his financial struggles with better financial advice and a more diversified investment strategy?
For example, could the former President have been better off simply investing in something as ordinary as an Exchange-Traded Fund (ETF)?
At first glance, suggesting that someone with Trump’s wealth and business acumen should have considered ETFs might seem simplistic.
After all, Trump built an empire in real estate, not exactly the playground of passive investors. He’s always been a man of bold bets, often eschewing the slow and steady in favor of the dramatic and headline-grabbing.
But as we look at his current financial straits — a mounting legal penalty that is increasing by roughly $100,000 a day, and a shrinking value in his stake in Trump Media & Technology Group Corp. — one has to wonder if a more diversified, less risky approach might have saved him some of these financial headaches.
ETFs are known for their simplicity and low cost, which makes them appealing for retail investors.
However, they also offer significant advantages for high-net-worth individuals, even for those with as much wealth as Trump once commanded. For starters, ETFs provide diversification across a wide range of asset classes — equities, bonds, real estate, commodities — all while minimizing risk.
Had Trump allocated a portion of his wealth into broad-based market ETFs or sector-specific ones, he could have benefited from the upward momentum of the broader economy, without exposing himself to the risks of single-stock or niche investments.
Given that his net worth has been buffeted by the wild swings in his personal ventures — especially with his social media startup — a more diversified approach could have mitigated these losses.
ETFs track indexes such as the S&P 500 or the Nasdaq, and are less susceptible to the individual volatility of a single business.
Instead of facing the gut-wrenching fall of one particular venture (as seen with Truth Social), Trump could have ridden the wave of the overall stock market’s performance.
Over the long term, the S&P 500 has consistently returned around 7-10% annually, a solid and predictable rate compared to the high risk, high reward (or high loss) gambles Trump has made over the years.
Passive income stream could have helped
As Trump’s wealth continues to ebb and flow with the success of his ventures, an ETF portfolio could have provided a much-needed steady source of passive income. High-dividend ETFs, for instance, could have delivered a consistent income stream to cover expenses, including the mounting legal fees that are now pushing him to liquidate assets.
With a multi-million-dollar fortune, Trump could have easily constructed a diversified portfolio of ETFs that would generate significant income, regardless of the ups and downs of his businesses.
As such, instead of being strapped for cash at such a critical juncture in his life, with a multi-million-dollar fraud verdict hanging over him, he could have been in a much stronger financial position today.
One of the hallmark characteristics of Trump’s financial strategy has always been the concentration of his wealth in a few large, risky bets, which primarily include real estate and, more recently, his social media company.
While this strategy has undoubtedly paid off for him in the past, it’s also made him vulnerable to spectacular losses.
Lesson in diversification
The current legal and financial quagmire Trump finds himself in may well be a lesson in the importance of diversification.
No one can predict the future, but financial advisors often stress the importance of having a balanced portfolio to weather the inevitable storms that come with investing. For all his success, Trump’s concentrated bets have made him vulnerable to swings that a more diversified approach, such as investing in ETFs, could have mitigated.
While it’s impossible to say for sure if an ETF strategy would have completely shielded Trump from his current troubles, it’s clear that a more balanced and diversified investment portfolio would have provided him with greater financial stability.
It may not have been as glamorous as his real estate deals or as headline-grabbing as his social media ventures, but sometimes, the smart bet is the more boring one.
And in Trump’s case, perhaps the path to even greater wealth would have been paved not by bold risks, but by financial solutions used by investors the world over.
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