Trump Accounts: Politics Over Opportunity
People often become so emotionally attached to a political side that it begins affecting their financial decisions. Recently, I have seen people saying they will not use Trump Accounts because they believe the accounts are a Ponzi scheme and that because of all the fail businesses associated to Trump they view this as some kind of scheme.
You can dislike Trump, question his motives or hate that the accounts carry his name. However, that does not make them a Ponzi scheme. The U.S. Treasury has stated that all contributions will initially be invested in: State Street SPDR Portfolio S&P 500 ETF, ticker SPYM.
With four additional low-cost index ETFs that are expected to become available in the coming months people will be able to invest in:
State Street SPDR Portfolio S&P 500 ETF — SPYM
iShares Core S&P 500 ETF — IVV
Vanguard Total Stock Market ETF — VTI
State Street SPDR Portfolio S&P 1500 Composite Stock Market ETF — SPTM
iShares Core S&P Total U.S. Stock Market ETF — ITOT
These are regulated ETFs that track broad U.S. stock-market indexes. The rules generally require eligible investments to track an index of primarily American companies, avoid leverage and charge no more than 0.10% annually.
State Street, BlackRock and Vanguard collect management fees based on the amount invested in their funds. Therefore, if Trump Accounts eventually attract billions of dollars, these companies will clearly benefit from the additional assets under management. That is how investment management companies normally make money; it is not evidence of a Ponzi scheme.
You can dislike the branding and remain skeptical of Trump’s motives, but calling the account a Ponzi scheme does not match how it actually works. Choosing not to take advantage of a potentially useful investment account simply because you dislike the politician associated with it seems odd to me, but to each their own.
