Roth IRA, as any seasoned wealth builder knows, is a retirement tool that allows you to invest in stocks, bonds and mutual funds, letting them grow, and finally, after a preset age limit (59-1/2) - allows you to withdraw the entire sum including gains, tax-free. It is a tool that every individual, if eligible, must utilize and urgently so because there is a maximum limit on the contribution you can make every year. In this context then, deciding on a single best Roth IRA stock purchase must be made very carefully. In fact, we would recommend that your stock purchases follow an overall strategy rather than focus on a single stock, but sometimes, narrowing the problem domain can help highlight useful characteristics of the type of stock purchase you should make.

Warren Buffett makes it a point to tell his shareholders and others who are interested in his investment philosophy that one must make each investment assuming that it will never be sold. And moreover, you must choose this investment as if it is one of only twenty such investments you might make over your lifetime!

These are profound investing statements and cover two important wealth building tenets:

1. There are, in a free enterprise society, far more opportunities than you have resources to invest in. Thus being very careful in your choice of investment, riding out bull and bear markets, can give you the type of long term returns on which fortunes are made.
2. By forcing yourself to be careful in your choice so as to limit your investments to twenty, you also learn to bet big. You will never become rich through $1000 investments, but well placed $100,000 investments can place you among the wealthy very quickly.

Warren Buffett himself usually purchases companies that are great and selling at reasonable prices, a philosophy that Phil Fisher espoused originally. Following his philosophy, the following characteristics emerge:

• Invest in businesses you understand thoroughly
• Invest when others are too afraid to buy
• Invest in great, long-term management - considering them to be your partners
• Companies that take great care of their earnings by
  • Either returning them to shareholders through dividends
  • Raising stock value through share buyback programs
  • Investing in opportunities with high Return on Capital Invested
• Have a large competitive advantage (large moat around their business)

The advantage that the Roth IRA will give you is that you don't have to pay taxes on any dividends, and this thus directly adds to your earnings. Plus, your capital gains stay with you at the time of your withdrawal after age fifty nine and a half. Within a Roth IRA it will be far more beneficial to use these dividends to buy more shares of the company you have invested in, allowing your investment to grow rapidly. If your investment does not pay dividends, Roth IRA will not give you any special benefits, except for the absence of taxation on your gains.

Keeping these points in mind, investments such as Berkshire Hathaway (BERK.B), or Trusts such as Legg Mason Value Trust are good long term bets. Be sure to consult with your advisor before making any investments however, and be sure to follow a single strategy as opposed to mixing and matching growth with value, mutual funds with individual company stocks and so forth. Or take advantage of years of experience through great investment newsletters and follow their philosophy.

Happy investing!