I’m 45 and I’ve Barely Invested in the Stock Market. I Recently Inherited $50,000. What Should I Do?

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Question: I'm 45 and I've barely invested in the stock market. I recently inherited $50,000. What should I do?

Answer: Well, to start, congratulations on your recent windfall. When invested responsibly, $50,000 can certainly get you well on your way to building your nest egg.

As for what to do with the money, there are two fundamental questions you need to answer.

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The first is where to put it, or what types of accounts you should open.

And the second is what specific investments you should buy. Let's tackle that first question first.

What accounts should you open?

Every person's situation is a little different here, but we can start with some planning basics. Do you have an emergency fund in place to cover you in the event you lose your job or have some large, unexpected expenses pop up?

If not, it's a good idea to set aside a couple of months' worth of expenses and keep them separate in a savings or money market account.

Once that is settled, your best option will likely be to open a Roth IRA. Roth IRAs allow for tax-free compounding of capital gains, dividends and interest, and there is no tax due when you take distributions in retirement (or after age 59-½.)

A 45-year-old can contribute up to $7,000 for tax year 2025 – you have until April 15, 2026, to contribute – and $7,500 for 2026. So, a married couple could potentially sock away a quick $29,000 for the two tax years.

There are rules here, though, so you'll need to make sure you qualify. To start, you (or your spouse) need to have earned income from a job or a business. Additionally, your income has to be within certain limits. The maximum modified adjusted gross income (MAGI) to make a full contribution is $150,000 for single filers and $236,000 for those filing jointly. In 2026, those numbers jump to $153,000 and $242,000. The amount you can contribute to a Roth IRA starts to phase out above those levels.

Great.

But let's say you earn too much to qualify for a Roth. What then?

You can always contribute to a non-deductible traditional IRA and then do a "backdoor" Roth conversion. (You can read more about the ins and outs of backdoor Roth conversions here.)

Once you've stuffed everything you can into a Roth IRA, any remaining investable cash can be put into a regular brokerage account.

What investments to buy

Now for the fun part.

You have your accounts open, but what investments do you buy?

The answer here will vary based on your experience and your existing investments (if you have any).

If you really are a blank slate – you have no other investment accounts of any size or significance – then it makes sense to start with a basic, low-cost exchange-traded fund allocation that gives you exposure to a mix of stocks, bonds and potentially gold or commodities.

An aggressive investor might put 75% of their portfolio into a broad stock index fund such as the Vanguard Total Stock Market Index ETF (VTI), 20% of their portfolio in a diversified bond ETF like the Vanguard Total Bond Market Index ETF (BND) and the remaining 5% in a gold ETF – the SPDR Gold MiniShares (GLDM), for instance.

A more moderate investor, meanwhile, might allocate less capital toward stocks (say, 55% to 60%) and more toward bonds (35% to 40%).

Whatever allocation you start with, just be sure to rebalance it once or twice per year.

If you're really itching to do something more exotic than an ETF portfolio, it's perfectly fine to dip your toes into stock investing. You can keep most of the portfolio in ETFs and carve out a small allocation to individual stock positions.

But let's say this isn't your only portfolio. Let's say you've been contributing to your company's 401(k) plan for years and already have a good nest egg in mutual funds within the plan.

Great!

Now you can afford to be a little more aggressive. Rather than invest exclusively in a low-maintenance ETF allocation, you can expand into individual stocks.

It's beyond the scope of this article to list out specifically which equities to invest in, though Kiplinger's best stocks to buy now can give you a good jumping-off point. Otherwise, here are a few important rules of thumb for buying individual names.

To start, keep your position sizes manageable. Entire books have been written about the science of position sizing, but we can keep this simple. In a $50,000 portfolio, a $2,500 position represents 5% of the portfolio. That's not a magic number, of course, but it's a good rule of thumb for a beginner. At that size, you can afford to experiment and make a few mistakes without putting the entire portfolio at risk.

And secondly, before you buy a stock, set your rules for when you plan to sell it. Do you cut your losses if it drops by a certain amount? Take profits if it rises by a certain amount? Buying and holding forever is a perfectly acceptable answer. Just make sure you know what your plan is going in. The only bad answer is "I don't know."

Charles Lewis Sizemore, CFA is the Chief Investment Officer of Sizemore Capital Management LLC, a registered investment advisor based in Dallas, Texas, where he specializes in dividend-focused portfolios and in building alternative allocations with minimal correlation to the stock market.