Last week I finally got around to making another deposit into my Roth IRA to max out the contributions for this year. It’s been a while since I’ve talked about this account, so you may want to read The Roth IRA Re-visited, Starting my Roth IRA, and the Best of the Roth IRA if you haven’t already. Here’s a brief overview though if you’re to lazy to read the other posts:

• There are no tax benefits in the current year, but the earnings and gains are tax free.
• Withdrawals can be made after age 59 1/2
• Your contributions can be withdrawn without penalty at any time (they were after tax remember)

Now for what I do with my Roth IRA. Unlike many personal finance writers, I don’t opt for the frequent contributions to broad market index funds. I’ve heard all of the arguments for them, and will admit that they’re a great fit for many people. I don’t want to dissuade anyone from using them if that’s what you want to do. I’m just not into them.

I, on the other hand, prefer to buy individual stocks and assemble my own “mutual fund” if you will. I don’t buy and sell very often at all, and I’m definitely not what you would call a day trader. I mostly just buy actually and I very rarely sell. Currently I’m working on assembling a very solid base of large cap stocks with steady dividends. After this foundation is established I will then probably branch out into other areas.

If you read the other posts earlier, you’d know that I have my Roth IRA through Scottrade and they charge $7 per trade. I typically buy in $1K increments which is enough to keep me from making rash decisions and keeps the expense ratio pretty low. This doesn’t provide instant diversification, but over time it does and will.

As for my most recent contributions I’ve already made one purchase and am looking to make another. I decided to add to my position in Bank of America (BAC) since the stock has been hammered lately along with the entire financial sector. I’m pretty sure that they’re not going anywhere anytime soon and that they will still be a good company in the future. It also helps that because of the recent sell-off the dividend yield is up over 6 percent.

Like I mentioned before I’m still looking for one more purchase, and I’ve had my eye on a couple of different companies. I was interested in Jack in the Box (JBX) over a year ago and they have since doubled. I’m still interested, but I’m not sure they’re worth quite as much as what they’re currently trading for. I would also like to own McDonald’s (MCD) but they’re also pretty expensive with a P/E ratio of about 41.

I’d like to hear from you though. If you were looking to purchase a stock right now, which one would it be? What would your reasoning be? Hopefully I’ll be able to learn something…

I’d also like to give a mention to two new commenters here at Fiscal Musings:

• David at Marketing Deviant and
• Racer X over at Life, Liberty and the Pursuit of Money

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