In a bear market such as we are experiencing now, you may be looking for bargains to buy. If you’re searching online for “best stocks to buy now,” you’ll find countless offerings. How do you judge the postings?

Before going any further, any article about “stocks to buy” is merely a starting point for further research, nothing else. Never assume more than that.

Let’s look at an article together: “The 10 Best Companies to Invest in Now: The undervalued stocks of high-quality companies are compelling investments today” (tinyurl.com/2ts6mwn7), posted on July 5, 2022, on the website of Morningstar, a U.S. financial services firm, and written by Susan Dziubinski.

There is a lot to like here, since it gives you more than just names of stocks. The “more” is explanatory information that helps put the listed stocks into context.

First, there is an explanation of the thinking behind why the stocks are included in the list. “During uncertain times, investors may want to own companies that offer some sense of certainty in terms of cash flows and company fundamentals,” Dziubinski writes.

A link to “The Best Companies to Own: 2022 Edition” (tinyurl.com/2p92kyu8), also on the Morningstar website and written by Margaret Giles, incorporates a discussion of the rationale for choosing these stocks, along with an important warning: “We aren’t advocating that you buy shares of every company on this list today. Even the greatest company can be a bad investment if you overpay. The share prices of many companies on this list overestimate their real value, so it may not be the right time to buy. Still, we believe these companies are essential for any stock investor’s watchlist.” Giles writes.

But that’s not all. As the first article points out: “(T)he best firms aren’t always the best stocks to buy at a given point in time. How much an investor pays to own a company -- best or otherwise -- is important, too.”

Marrying the two lists gives you the 10 most undervalued stocks from the “best companies to own” list. That provides you 10 stocks to research further.

Dziubinski offers important links to additional material, such as Morningstar’s “Guide to Stock Investing” (tinyurl.com/ya6tjjvb), also by Dziubinski, which I would think of as the basic, must-read manual that precedes everything.

Here are a few highlights.

Morningstar’s approach is “having an intimate knowledge of the company's sustainable competitive advantages, determining what its shares are worth, and then only buying the stock when there’s a significant margin of safety in doing so.”

Morningstar rates stocks based on “fair value” compared to the stock’s current price. A four- or five-star rating means the stock is undervalued; three stars indicates a fairly valued stock; one or two stars points to the stock being overvalued. The idea is that stocks that are undervalued are better buys.

Morningstar also has a rating for “Economic Moat.” That’s the firm’s view of a company’s competitive advantages and how well and how long the company can stay ahead of its competitors and earn high returns.

In the Morningstar system, if a company is viewed as having competitive advantages that are expected to last more than 20 years, it has a wide moat. If the time period of advantages is short, the company has no moat at all. A wide moat is better.

With any system you use for investing in stocks, be sure you understand the thought process behind the recommendations, and how it meshes (or doesn’t) with your approach to (and knowledge of) investing. From there, choose wisely, but only after doing your own research.

This is just one example of how a firm might come up with a list of stocks to buy. I like the approach taken here for a reason: It gives you a list to consider, the rationale behind the composition and resources for further research.

(By the way, I subscribe to many research services, Morningstar being one of them.)

Seasoned investment counsel (tinyurl.com/52nus8hz) and award-winning columnist and author, Julie Jason, JD, LLM, promotes financial literacy and investor protection. Read her latest book, "The Discerning Investor: Personal Portfolio Management in Retirement for Lawyers (and Their Clients)" (tinyurl.com/4u7h9pjs), published by the American Bar Association. Write to Julie at readers@juliejason.com. While all questions cannot be answered, each email is read and reviewed and can lead to discussion in a future column.

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If you were to search online for "HSA (aka health savings account) and 401(k)," some of the results might seem like there is a competition to determine which one is a better option when saving for retirement.

In my mind, there is no competition. Choose the 401(k) to save for living expenses in retirement; choose the HSA to save for medical expenses in retirement.

Ideally, choose both to build up monies that you will need after you retire. Why? It's far too easy to underestimate the cost of medical care in retirement. Recent Fidelity studies (tinyurl.com/48cnt7ar) show that couples' out-of-pocket estimated health care costs average $315,000, seven times more than people anticipate.

HSAs were introduced in 2004 (Internal Revenue Code Section 223 -- tinyurl.com/mr2djpb9), 20-plus years after 401(k)s were established. Now, there are more than 32 million HSA accounts (2021), according to Devenir, an HSA investment adviser and industry consultant (tinyurl.com/285cwx5a).

HSAs are used to pay or reimburse qualified out-of-pocket medical expenses and are attached to high-deductible health plans (HDHPs).

Among the potential benefits of HSAs (from IRS Publication 969, tinyurl.com/2p9x5ytd) are:

-- You can claim a tax deduction for contributions you make to your HSA even if you don't itemize your deductions.

-- Contributions to your HSA made by your employer may be excluded from your gross income.

-- Contributions stay in the account until used. (This is unlike a flexible spending account, or FSA, for which funds generally must be used by the end of the plan year.)

-- The interest or other earnings on the assets in the account are tax-free.

-- An HSA remains with you if you change employers or leave the workforce.

Both HSAs and 401(k)s have contribution limits. For 2022, the maximum HSA limit for an individual with HDHP coverage is $3,650. For family HDHP coverage, it is $7,300. (Note that if you are an eligible individual age 55 or older, you can contribute an additional $1,000.) According to Revenue Procedure 2022-24 (tinyurl.com/55xcywhu), individual coverage will be $3,850 in 2023, and family coverage will be $7,750.

Note that once you enroll in Medicare (generally age 65 or older), you cannot contribute to an HSA, although you can still use it to pay for medical expenses.

For 401(k)s, the contribution limit for 2022 is $20,500 (with a catch-up contribution of $6,500 for those age 50 and older). Generally, you can contribute to a company 401(k) if you are still working at that company, regardless of age.

How do HSAs factor into retirement discussions? Like the 401(k), contributions occur before retirement. While both traditional 401(k)s and HSAs are funded with pre-tax dollars, HSA withdrawals are tax-free for qualified medical expenses, while pre-tax 401(k) withdrawals are subject to income taxes.(Note that 401(k)s can also be funded with after-tax dollars.)

If you have limited funds, should you fund the 401(k) or the HSA? If you have a 401(k) with a match, contribute enough to maximize the match. Then consider the HSA.

In the alternative, you could max out HSA contributions every year and spend as little of the HSA money as possible so that you will have the funds to use for medical expenses once you retire. That would work for someone with a pension that covers retirement living expenses, but not others who need 401(k) savings.

Again, try to fund both. But be vigilant. The 2021 Employee Benefit Research Institute reported that 56% of workers who began contributing to an HSA reduced their contributions to a 401(k) (tinyurl.com/4j89n9za). You don't want to reduce your 401(k) below the amount that maximizes the match.

When it comes to retirement, the goal is to save as much as possible for as long as possible. Both HSAs and 401(k)s can have important roles in your long-term planning. If you have both, learn as much as you can about each and then decide how they best fit into your overall plan for a long and healthy retirement.

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For many savers, biases might be contributing to their long-term efforts to fund their retirement.

"Status quo bias," or inertia, keeps you from taking action.

That is, "In choosing among alternatives individuals display a bias toward sticking with the status quo," according to "Status Quo Bias in Decision Making," published in 1988 in the Journal of Risk and Uncertainty (tinyurl.com/5n7yy4ue). Recognizing inertia as a stumbling block has led to advances in 401(k) decision-making by turning the decision into an opt-out instead of an opt-in choice.

The recent release of "How America Saves 2022" (tinyurl.com/2p8cvkkv) by Vanguard, an investment management company, found that in 2021, "participant retirement plan behaviors remained largely unaffected and, in some areas, continued to improve. This is a testament to the growing use of automatic solutions, which leverage inertia for the benefit of the participant."

Automatic solutions include auto-enrollment and target date funds, with the latter described by the Securities and Exchange Commission's Investor.gov as being "designed to make investing for retirement more convenient by automatically changing your investment mix or asset allocation over time" (tinyurl.com/2xzcvj9d).

Vanguard's analysis found that at year-end 2021, 56% of the retirement plans that are part of Vanguard's recordkeeping business had adopted automatic enrollment (up from 46% in 2017), including 75% of plans that had at least 1,000 people participating. Overall, 64% of all Vanguard participants were "solely invested in an automatic investment program." That figure was up from 36% at year-end 2012.

Two-thirds of the Vanguard automatic enrollment retirement plans also automatically increased the deferral rate (the percentage of an individual's income contributed to the plan).

Ninety-nine percent of all the Vanguard plans with automatic enrollment defaulted the participants into a balanced investment strategy in 2021, with 98% selecting a target date fund as the default.

Vanguard is not the only investment company to report a rise in automatic options.

Fidelity's first-quarter report of savings behavior for 2022 (tinyurl.com/3ct3pxy7), which surveyed balances for more than 35 million IRA, 401(k) and 403(b) retirement accounts, found that 85% of Gen Z savers (those born between 1997 and 2012) had their entire 401(k) savings in a target date fund.

Inertia works. Fidelity's "Building Financial Futures" (tinyurl.com/4xpjfb69) noted that 90% of employees who are auto enrolled do not opt out.

Auto enrollment may become mandated. In March, the U.S. House of Representatives passed the Securing a Strong Retirement Act (tinyurl.com/mryadypb), which has a section requiring employers that establish new defined contribution plans (with some exceptions) to automatically enroll new employees, when they are eligible, at the level of at least 3% of the employee's pay, then automatically increase that annually by 1% up to at least 10%, but no more than 15%. The Senate is working on its own version of retirement legislation.

If your company's 401(k) plan currently has automatic deferral rate increases and target date funds, should you choose those options -- or opt out?

As to participating in the retirement plan, you know my point of view -- you'd have to have a very good reason not to participate. The same holds for automatic deferral increases -- the more, the better.

As to automatic investments, that's a personal matter. If you are not able or willing to spend time studying your options, the target date funds will help you participate in the stock and bond markets. That's a definite advantage over just putting your money in the "bank" by choosing a money market option.

I'm grateful to the 401(k) providers who married behavioral economic theory with 401(k) enrollment. Sometimes we need to be placed in positions that have favorable results in spite of our status-quo-seeking selves.

Julie Jason, JD, LLM, a personal money manager (Jackson, Grant Investment Advisers Inc. of Stamford, Connecticut) and award-winning author, welcomes your questions/comments (readers@juliejason.com). Please visit www.juliejason.com.

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