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Learnings from President Obama's portfolio
May 30, 2013

President Barack Obama's declaration of financial holdings was made public this month. Here are a few tips we can learn by looking at it.


Author : Content Team



 Learnings from President Obama's portfolio

Around two weeks ago, the White House released US President Barack Obama’s financial disclosure, which can be seen here. The president of the United States has to mandatorily submit his investments with the United States Office of Government Ethics.

According to an article in Nasdaq, the biggest mistake he has made is to give too little attention to equity in his portfolio.

President Obama’s retirement portfolio is mainly in an index fund – the Vanguard 500 Index Fund. This fund invests in 500 of the largest US companies across sectors and industries. According to Business2community, Vanguard 500 Index Fund returned 13.8% over the last year and 12.5% over the last three years. What’s interesting is that this is the only equity exposure he has. More than half of his savings are in Treasury Bills and Notes, yielding just over 2%.

This is a mistake many investors make. When it comes to their retirement portfolio, they are completely risk averse. Always include equity when saving for your retirement. The aim of your retirement portfolio is to generate growth as well as beat inflation. Equity is the best asset class to deal with both issues.

But Obama has also done some smart saving.

  1. Started a college fund for his daughters. It is estimated that currently there is around $200,000 in that fund.
    Putting money aside for a child’s education should be one of the top saving goals of families.
  2. Has a ‘rainy day’ fund. The family also has between $250,000 and half a million in checking accounts, with between 4% and 7% of its net wealth in cash.
    It makes sense to always keep a few months' expenses in an emergency stash. You never know when you might need it. Or alternatively, you can also take advantage of an investing opportunity should one crop up.

The disclosure statement lists assets and liabilities in dollar ranges, so pinpointing the president's exact net worth is difficult.

According to Celebrity Net Worth, President Barack Obama earns a base salary of $400,000 per year. Once his annual expense account, travel account and entertainment stipend are accounted for, it totals over $550,000 each year.
USA Today reported that much of Obama’s cash flow comes from book royalties. Since the disclosure statement does not deal with specifics, but with ranges, it is not possible to narrow down on a figure. The disclosure form lists $100,000-1 million in royalties from Dreams From My Father, $100,000-1 million from Of Thee I Sing: A Letter to My Daughters, and $50,000-100,000 from The Audacity of Hope: Thoughts on Reclaiming the American Dream.

However, the President need not fret too much about not having sufficient funds to pay for his daughter’s education or run out of money in his retirement fund. His royalties will continue from the three books and nothing stops him from writing a fourth once he finishes his term. Then there is money to be made in speeches. In 2009, 2010 and 2011, Bill Clinton earned $7.5 million, 10.7 million and $13.4 million, respectively. Just for his speeches!
George W Bush had delivered almost 140 paid speeches for at least $15 million in his first two-and-a-half years after leaving the White House.

Nasdaq has one suggestion though to help Obama save some more right now. Obama refinanced his Illinois residence in 2005 at a rate of 5.25%. By refinancing hismortgage at the current 3.58%, he could save up to $16,700 annually in interest.

Do make note: Responsibly tackling your debt can help you save a lot!

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