What is the best way to invest this money?

I am 22 years old, and I recently came into an inheritance from a relative who passed on. Though the estate is currently being valued and will have to go to probate due to some unresolved matters with a property he owned, there was a lifetime annuity that was created and not included in the trust. What it boils down to is, for the next 12 years, I am to receive a monthly deposit of $500 (from the annuity). I want to do right by him, as he did a lot for my family and was a true gentleman.

His close friend and personal financial adviser has recommended that I put an amount towards a Roth IRA and he suggested opening a Money Market account. Here's the problem: I don't know how any of this works. Can someone be kind enough to explain what my best options are? He attempted to explain it, but I didn't quite grasp it. Any help is greatly appreciated!

You are 22 years old -- What an opportunity!
Let's go through Roth IRA basic. The friend that said you should contribute to a Roth IRA is very smart.

As a 22 years old, you are allowed under the law to contribute to a Roth at a rate of $4,000 per year or $333.33/month. I will get to how to invest the money in just a little bit, but if you invest it at 8% per year in 12 years you will have $80,000 in that IRA. Now if you leave it until you are 65, it will be worth $871,000.

However if you continued to contribute 333.33/month out of your pocket from the time you are 34 to 65, that investment will be worth $912,000. See how important the first 12 years are? That's the power of compounding.

Now with the other $167.00 per month from the annuity, if you just put it in a money market account and received 4%. After 12 years, it would be worth, $30,000. A pretty nice emergency fund in case you lost your job or had a major disaster in your life. If you never touched it and kept it invested at 4% till age 65, it would be worth $100,000.

Your total is close to $1,000,000 with out even contributing anything out of your pocket. Please be aware I have made some simplifying assumptions about taxes. I assumed that you paid the taxes out of other income. So the non-IRA assumptions are more than likely too high. The financial adviser could give you a more accurate estimate.

One more quick note, if the 8% return in the IRA were 12%, without any contributions out of your pocket after the initial 12 years, the IRA at age 65 would be worth $3.6 million. What a nice nest egg?

Now, how do you invest it?
Look for long term investments that have proven themselves of the last 10 years. I would start out with a small cap growth mutual fund that has had a 10 year good track record, then move into a mid cap growth mutual fund and then last add a large cap value mutual fund and an international mutual fund.

At your age, don't worry about bond funds or buying bonds. Here is my recommended goal by the time you have been putting money into it for 2 years.

30% Small Cap Growth Fund
30% Mid Cap Growth Fund
20% Large Cap Value Fund
20% International Fund

The friend that is the financial advisor can help you select the funds or go to Yahoo Finance. They have a good mutual fund screener that you can use. Play with it, to learn how it works.

The owner/contributor (you) put money into a Roth IRA using money (earnings) that you have generally from a job. Hopefully, you currently earn more than $4,000 per year because you to at earn at least the amount you put in an IRA. In your case, you would put money from the annuity into the Roth and live off your earnings from a job. The investments in the Roth grow tax free, and when you retire, any time after 59 1/2, you can withdraw it tax free. Roth IRAs do not reduce your current taxes, but the money grows tax free and you withdraw it tax free. The government seldom gives gifts, but this is a great one.

I would buy Real Estate.

Get your part and invest in a property on and island or Orlando any tourist town is great. I made mine in the Florida keys and it did great. Don't let someone handle your money you buy a place and pay for it it will pay off.