The current bull market has lasted 8 years. This is much longer than the typical bull market.

Further, the S&P 500’s price-to-earnings ratio is 25, well above historical averages.

Investors around the world are wondering if the next recession is around the corner. A case for this could certainly be made…

Which leads investors to wonder how they can prepare their portfolios for minimal losses.

While it’s impossible to say when the next recession will occur, investors can position themselves defensively in the event that it is coming soon.

This article will discuss three actionable techniques to position your portfolio for the next recession.

Do Not Sell!

Before describing three actionable steps to succeed in the next recession, I want to elaborate on the importance of holding your stocks during the next recession.

When the markets are dropping, it might be tempting to hold cash. The wealth-eroding power of inflation may seem less harmful than equity market risk when the S&P 500 drops by 20%.

However, there are a number of reasons why selling your portfolio holdings in anticipation of a recession is a poor investment decision.

The most notable is the opportunity cost of holding cash. Investors who incorrectly predict a market recession and sell their holdings could be left on the sidelines watching as the S&P 500 surges another 10%, 20% or 50%.

There is also the issue of capital gains tax.

Long-term investing allows for the indefinite deferral of capital gains tax, creating a ‘Buffett Loan‘ that has a profound compounding effect over the years.

Selling holdings will trigger capital gains tax, which eliminates the benefits of a Buffett loan.

Staying the course during a recession also allows investors to continue collecting dividends, which can then be used to buy more stocks on the cheap. Buying at the bottom of a recession is a fantastic way to build long-term portfolio value.

Holding onto stocks during a recession is an important component of a long-term investment strategy. The other tips in this article might not apply if you intend to sell stocks in anticipation of a recession.

The remainder of this article will discuss three specific portfolio strategies to minimize losses in market corrections and recessions.

Step 1:Target Dividend Growth Stocks

Holding dividend growth stocks during a recession is beneficial because dividends should continue to grow (in most cases) even if stock prices decline.

If a company does cut its dividend during a recession, this triggers an automatic sell according to The 8 Rules of Dividend Investing.

That begs the question – how can investors find stocks likely to continue increasing dividends during a recession?