23-Year-Old Received $50,000 Inheritance And Turns To Reddit For Advice 'How Should I Invest It?'

The windfall from an inheritance can lead to promising opportunities or offer a fresh start for someone who is deep in debt. However, if you don't know how to use an inheritance correctly, you can end up losing the funds. 

It's always great to get an inheritance, but it requires a lot of responsibility to manage the money and allow it to grow over time. That's why a 23-year-old turned to Reddit after receiving a $50,000 inheritance. 

"How should I invest it?" the Redditor asked.

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The individual wants to know the best ways to invest the money and intends to let it compound for at least 10 years. Fellow Redditors jumped into the comments to offer their suggestions.

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Start With A High-Yield Savings Account

One commenter suggested that the Redditor put the money into a high-yield savings account. Some of these accounts yield more than 4% APY, and if you look for online banks, it gets even easier to find that type of yield.

These accounts come with no risk since you cannot lose principal. However, these accounts can underperform inflation, and you might miss out on better investing opportunities. Furthermore, interest income is treated as ordinary income, so the real return on your savings account will be less than the posted APY. 

While the 23-year-old might earn higher returns with an index fund, a high-yield savings account gives them time to think about where to put the money. If you ask Reddit about what to do with a $50,000 inheritance, you shouldn't rush to make a decision. While there was great advice, it's best to take things slowly when you receive a significant windfall and don't have much investing experience. 

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Regularly Contribute To A Roth IRA

The same Redditor who suggested a high-yield savings account also recommended contributing to a Roth IRA. The 23-year-old has enough money to contribute to a Roth IRA for the next seven years thanks to the inheritance. 

Granted, the Redditor can contribute some of their own paychecks into a Roth IRA and put the inheritance money in a brokerage account. This approach, if the Redditor believes it's right for them, would allow the individual to invest more than $7,000 per year.

The main advantage of a Roth IRA is that the dividends and capital gains are all tax-free. You can't withdraw until you turn 59 1/2 years old, but you can gradually build your Roth IRA over time.

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Diversify Into ETFs

Multiple commenters suggested that the Redditor spreads the inheritance across ETFs. Since this is the Dividends subreddit, most of the commenters suggested high-yield dividend ETFs.

Some Redditors also suggested business development companies and real estate investment trusts, two asset classes that are known for their high yields. Keeping these assets in a Roth IRA will allow the 23-year-old to collect cash distributions without having to pay any taxes on them.

ETFs make it much easier to invest in stocks. These funds highlight their objectives and often spread their capital across hundreds of holdings. When comparing ETFs, make sure you find funds with low expense ratios that align with your long-term goals. 

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