What a lovely position to find yourself in! There's a lot of doors open to you now that may not have opened naturally for another decade.
If I were in your shoes (benefiting from the hindsight of being 35 now) at 21 I'd look to do the following two things before doing anything else:
1- Put 6 months worth of living expenses in to a savings account - a rainy day fund.
2- If you have a pension, I'd be contributing enough of my salary to get the company match. Then I'd top up that figure to 15% of gross salary into Stocks & Shares ISAs - with a view to them also being retirement funds.
Now for what to do with the rest... Some thoughts first...
- If you don't want to live in it just yet, I'd think twice about buying. You wouldn't want a house to limit your career mobility. Or prove to not fit your lifestyle within 2 years, costing you money to move on.
- Spending it all on travel would be excessive. Impromptu travel tends to be more interesting on a lower budget. That is, meeting people backpacking and riding trains and buses. Putting a resonable amount in an account to act as a natural budget for this might be wise.
"approx. 12% gain over 6 years so far" equates to about 1.9% annual return. Not even beat inflation over that period - so guessing they had it in ultra-safe "cash" (a guaranteed way to lose money over the long term). Give them the money to 'look after' again? I'd sooner do it myself with a selection of low-cost vehicles and equal or beat their return with far lower costs.
A) If you decided not to use the money for big purchases for at least 4-5 years, then you could look to invest it in equities. As you mentioned, a broad basket of high-yielding shares would allow you to get an income and give opportunity for capital growth.
-- The yield income could be used for your travel costs.
-- Over a few years, you could fill your ISA allowance and realise any capital gains to stay under the annual exemption. Over 4 years or so, it'd all be tax-free.
B) If you do want to get a property sooner, then the best bet would to seek out the best interest rates. Current accounts, fixed rate accounts, etc are offering the best interest rates at the moment. Usual places like MoneySavingExpert and SavingsChampion would help you identify them.
-- There's nothing wrong with sitting on this money for a couple of years whilst you fid your way with it. It mightn't earn much but you'd likely keep pace with inflation. And you definitely wouldn't lose it or risk it unnecessarily.
C) If you wanted to diversify your investment, you could look to buy-to-let (as the other post suggested). This would require a 25% deposit and likely would cost 10% of rental income to have it managed for you. There's room for the property to rise in value and the rent should cover a mortgage. But it may come with the headache of poor tenants or periods of emptiness - so it's not the buy-and-forget that many people assume. With some effort though, it may provide the best route to making the most of the money.
D) Some mixture of all of the above at different stages...
Your money, your choices.
And a valid choice would be to sit on the cash until you learn more about your options and feel the direction your heart is pointing you.
Hope that helps. I'm happy to elaborate if you wish.