It's not a trick question. I was just wondering today what is the ultimate effect of adding $1000 to my "family fortune". As I think I'm on track to have enough to live off by the time I retire, additions to my net worth over the next 20 or so years should end up increasing the size of my estate. Of course one has to make a lot of assumptions to model this. My assumptions are:
* my kids and descendants either make their own way, or at least live off the income of the "family fortune" rather than blow the lot. A big assumption, but at least I won't be around to find out if I'm wrong ;)
* the "estate" will be invested tax effectively and in a sensible asset allocation that provides a reasonable "real" return - say 4%. This could be conservative, if the assets are mainly "high growth" ones such as stocks, real estate, and some bonds. But, looking at the long term there is the risk on entire markets doing very poorly, hyperinflation, and so on. Imagine if your family fortune had been entirely invested in Russia, Germany or Argentina 100 years ago. So there is probably a need to diversify between markets and also to spread the actual holdings to several different countries to minimise sovereign risk. This is likely to diminish to overall returns achieved.
So, what might $1000 be worth? It could provide a weekly income of around 77 cents per week on an indefinite basis. Not as much as you might have thought.