It’s been 6 years since I got a trust fund worth $630k and due to bad choices it’s dropped to $350k – how do I turn it around?

In numerous prior pieces, I urged those starting a trust for someone to focus more on education rather than complex legal structures to protect heirs from making poor financial moves. Undoubtedly, trusts have their place in some families.

However, if there’s enough trust that a child or other beneficiary can manage large sums of money in a responsible manner, perhaps a trust structure isn’t the one and only solution for those looking to give money to someone who has less experience with finances or life in general, at least in my very humble opinion. In some instances, a trust (which releases funds at a certain age) may only be delaying poor financial decisions.

In the case of this individual who recently posted on Reddit, they made mistakes that caused their trust fund (from the grandparents) to shrink from $630,000 to $350,000 in just six years. The self-described “financial rookie” may have fumbled the ball early on.

But the good news is that there’s still a lot of money left. And perhaps some invaluable lessons have been learned about how not to manage a six-figure sum. Now that the person has realized their mistakes, they can take small steps to correct them and ensure the rest of their trust fund is in good shape to grow.

Turning things around with what remains of the trust fund

If managed effectively, perhaps the $350,000 amount (let’s not kid ourselves; that’s still a lot of money!) can grow back above the $600,000 mark. Of course, a financial advisor seems like a must in this case, as the person seemingly knows very little about budgeting and investing. In any case, it’s not too late to turn things around. In fact, an argument could be made that “enjoying” a portion of one’s trust fund is a good thing as long as the individual manages the rest in a responsible manner. 

Indeed, the trust, which was meant to go towards educational pursuits, can still fund a four-year degree or even a Master’s. In such a scenario, perhaps the investment in one’s self is still worth making. If the person isn’t all too keen on going back to school, though, perhaps investing in the stock market could prove a smart decision for the long haul. Indeed, someone who’s got time on their side can really benefit from compounding to be had over the decades. 

Personally, I think a set-and-forget approach focused on a wide range of balanced- and growth-focused exchange-traded funds (ETFs) makes a lot of sense. Such products tend to have fairly low fees while providing passive (or hands-off) investors with exposure to a wide range of assets and asset classes. Of course, I’d advise against going all-in on growth or over-extending oneself on the front of risk. Indeed, speculative assets or dangerous momentum plays could erode what remains of a trust fund in a hurry.

Don’t be tempted to chase speculative investments.

Whether we’re talking about a stock that’s doubled, tripled, or quadrupled in the past year (think shares of Palantir (NASDAQ:PLTR | PLTR Price Prediction), or an asset like Bitcoin, which could go either way, it’s important to note that the “hot” investment of the time may also be one of the riskiest. Instead of trying to gain back what one has lost in a trust fund, I think it makes more sense to settle for a “sustainable” return that can be achieved over the course of many decades. 

In any case, chat with a financial advisor and take steps to educate yourself in a way that you can move up the ranks from a “financial rookie” to a seasoned veteran who can make the smart money moves automatically. Whether we’re talking about saving and budgeting or investing for the long-term, there are so many resources available out there for one to graduate from rookie to sophomore and, eventually, a financially-savvy veteran of the game.