Follow the citations
TL;DR: Politifact ruled the claim False.
Politifact found that Deborah Friedell was quoting Michael Antonio (who wrote Never Enough: Donald Trump and the Pursuit of Success) who was misquoting the National Journal. He sort of pushed the two quotes together, taking the parts that sounded best from both.
Or look at the source
The claim in the National Journal said:
Had the celebrity businessman and Republican presidential candidate invested his eventual share of his father’s real-estate company into a mutual fund of S&P 500 stocks in 1974, it would be worth nearly $3 billion today, thanks to the market’s performance over the past four decades. If he’d invested the $200 million that Forbes magazine determined he was worth in 1982 into that index fund, it would have grown to more than $8 billion today.
First problem, that only gets him to $3 billion.
Second problem, to get to $8 billion, we have to take Donald Trump's wealth in 1982 and put it in a mutual fund. Not his father's.
Third problem, he'd have to sit on the money. He wouldn't have been able to spend any of it. Even modest withdrawals, starting in 1982, would have left him further and further off this pace. He certainly couldn't have funded the Trump lifestyle.
Fourth problem, this completely ignores taxes.
The bare argument of 1974 is based on Trump taking over managing the business in 1974. But that is not the same thing as transferring wealth. His father still owned the business from 1974 to 1999.
The National Journal is suggesting that when he took over management of the company, he could have liquidated and put the money into a mutual fund. If we assume that his share of the company was worth $40 million in 1974, then his share would have been worth $3 billion in 2015 (when the article was written). Of course, that neglects taxes and spending. Neither he nor his father could have taken an income from that money.
I'm not going to do the math but here's a glance at taxes. The privileged capital gains rate of 15% doesn't date back continuously to 1974 and is the lowest rate during that time. The rate was more typically 20%, 28%, or 35%.
The estate tax in 1999 was 55% of amounts over $650,000.
A glance at the numbers
The same kind of estimates that put Donald Trump's wealth in the $3-5 billion range now put his father between $100 million and $300 million at the time of his death. The S&P 500 only grew from $1,248.77 on January 1st, 1999 to $2,316.10 now.