Dividends4Life: 3 Critical Lessons on Investing in Recessions

The U.S. economy officially entered into a recession in February, and challenging conditions will likely continue in the near future. The coronavirus pandemic has presented a variety of obstacles and uncertainties that have shaken confidence at the consumer and enterprise levels and prompted dramatic shifts in business operations. Here are three things to consider as you chart your portfolio strategy during a recession....

1. Each recession is different - If you're managing investments right now, there may be a natural temptation to look at patterns and strategies from prior recessions and attempt to map them on to the current situation. Relying on previously successful playbooks and companies simply won't cut it in many cases.

2. Focusing on high-quality companies takes on added importance - The weakened economy and overall uncertainty created by the novel coronavirus pandemic have shifted the operating environment. Recessions can shake out relatively weak businesses or reduce the odds of success for speculative plays that depend on ideal operating conditions to succeed. 

3. Recessions can present opportunities to buy strong businesses - The broader market has come roaring back following the March sell-off spurred by the coronavirus pandemic. However, there are still stocks trading at depressed valuations or that otherwise present attractive long-term growth potential. 

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