Another recession is inevitable. It is not a question of if, but when it will happen. It is critical that investors prepare themselves for the recession. The stock market rally of the last decade has created apathy and laziness among many investors. These “bull market crazy” unprepared investors will learn a hard lesson when the recession hits.

To be sure, no one knows when the recession will strike. I am not saying that the stock market rally will end tomorrow, or to sell all your stocks now to prepare for the coming hard times.  I am saying that the rally will eventually end, probably sooner rather than later, and there are things you can do today to ease the blow.

#-ad_banner-#This article will provide seven easy-to-follow steps you can take to prepare for the inevitable recession. First, let’s look at what exactly a recession is and how you can identify it.

What Is A Recession?
A recession is defined as a temporary slowdown in economic activity. It is part of the business cycle, and economists say it happens whenever the GDP declines for two or more quarters.

How To Predict A Recession
Quarterly drops in income, manufacturing, sales, and employment are four crucial signals of a recession. What investors need to know is that these four economic indicators will start to decline before the GDP dips, making them an excellent signal that a recession is just around the corner.

1. Raise Cash
The phrase “cash is king” is especially true during recessionary periods. Now is the time to take a look at your cash reserve and increase it. Having a cash hoard will enable you to take advantage of the bargains available during recessionary times. Buying stocks during economic slowdowns is a time-proven strategy to build wealth. Having cash on hand is the only way to execute this strategy.

2. Lighten The Debt Load
When times are booming it is effortless to get into debt. Low-interest rates and easy access to capital during the good times can lead to high debt levels. Once the easy money spigot is turned off, as it often is during and before recessionary periods, debt can be crushing. This is particularly true if your source of income suffers from the recession. Now is the time to get your debt load under control and use the money that once went to debt service to build cash reserves.

3. Lower Risk Levels
Now is the time to take a close look at your investments. Stocks that have performed remarkably, as many have, must be scrutinized both fundamentally and technically to assess if the price has become overextended thus too risky to hold. These overextended stocks must be dumped to lower your risk levels going into the next recession. Use the capital raised by selling your overextended holdings to bolster your cash hoard!

4. Decrease Portfolio Volatility
During bull markets, stock volatility can be your friend. As the economy slows, instability becomes the long-term stockholders enemy as stocks can easily just keep dropping during recessionary periods. Volatile stocks, such as newly issued IPOs, biotechs, and bleeding edge tech companies, should be sold whenever recession signals are noticed.

5. Consider Commodity-Based ETFs
Commodities, such as gold, silver, and agricultural products, can be recession-proof and even thrive during recessionary periods. Consider allocating some of your investible assets into precious metals and agrarian commodity-based ETF s as the recession starts to rear its ugly head.

6. Consumers Staples Are King
During recessionary periods, consumer staples can be the king of stocks. The reason being is that consumers need to buy the staples regardless of how bad the economy becomes.

7. Prepare To Buy
Recessions are a great time to get long the stock market. Bargains abound during difficult times. Investors who have followed the above will have cash available to buy the bargains!

Risks To Consider: “Markets can remain irrational longer than you can remain solvent.” This well-known Wall Street saying is particularly true during pending recessions and other economic slowdowns. Always use stops and position size wisely when investing in the stock market.

Action To Take: Raising cash and lowering volatility are the two keys to thriving during a recession. Remember, recessions can be beneficial to stock investors if they have the available cash to take advantage of bargains!

Editor’s Note: Missed The Extreme Tech Profits Summit? Watch The Rebroadcast!
We hope you had the chance to tune in to the Extreme Tech Profits summit last week. The event was chock-full of incredibly valuable (and actionable) information. Due to overwhelming demand for the summit, we’ve decided to rebroadcast the summit to those who missed out last Wednesday. The video is still available, but it won’t be up for long. Click here to watch it now.