Is Your Portfolio Ready for A Double-Dip Recession?

Here are 10 portfolio themes to keep in mind.

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With the threat of a double-dip recession in the near future, investors should position their portfolios to protect themselves from another downturn. "Now is not the time for heroic bets," says Rob Arnott, chairman of Research Affiliates. "Now is the time for a cautious, sensible, defensive stance so that you have the resources to pounce on opportunity when markets present us with more attractive pricing." With that in mind, here are 10 portfolio themes that investors should keep in mind in these uncertain times.

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Make a plan. Before you start investing your money, it's important to make sure you have a plan. If you'll need the money within a few years, say for a home downpayment, it should be in less volatile investments. Many investors get burned by being greedy. "Don't get sloppy, because a big part of these bear markets is they really expose flaws in your financial plans," says Russel Kinnel, Morningstar's director of mutual fund research.

[See U.S. News's list of The 100 Best Mutual Funds for the Long Term, and use our Mutual Fund Score to find the best investments for you.]

Treasuries. Treasury notes, which are backed by the full faith and credit of the U.S. government, are a reliable source of income even in the midst of a souring economy. Experts suggest that investors keep some portion of their portfolios in treasuries. Still, now is not the ideal time to buy treasuries. For starters, investors have begun crowding the treasuries market, driving the yield on 10-year notes below 3 percent for the first time since 2008. "I'm afraid that by suggesting that people need more, there can be some momentum-chasing," says Jeff Tjornehoj, Lipper's research manager for the United States and Canada. Meanwhile, if the economy recovers enough, rising interest rates could plague treasuries.

Dollar-cost averaging. Timing markets is a dangerous game. That's why many advisers suggest that investors practice dollar-cost averaging, which means investing the same amount of money on a regular basis regardless of what the market is doing. This way you don't risk putting all of your money into the market when it's at or near its peak. "You may not get the maximum returns, but if it keeps you from panic-selling, then you're still better off than you would have been," says Adam Bold, founder of the Mutual Fund Store.

[See How to Keep Your Cool in a Turbulent Market.]

Gold. In times of uncertainty, many investors turn to gold. The precious metal is a good alternative in the sense that it's generally not correlated to basic economic activity, says John Derrick, director of research for U.S. Global Investors. "It's an insurance policy against bad government policies," he says. He argues that gold should be able to maintain its value better than paper currencies in a deflationary environment.

[See What Gold Can (and Can't) Do for You.]

Defensive stocks. Certain industries have a reputation for performing comparatively well during tough times. Healthcare stocks, for instance, are widely considered to be defensive investments. In 2008, funds in Morningstar's health category lost an average of 23.4 percent. By comparison, the S&P 500 fell 38.5 percent that year. Still, each downturn is different, and an industry's relative outperformance during past rough patches doesn't guarantee it will continue that trend in future ones. Another defensive strategy is to put money in companies with solid balance sheets and strong brand-name recognition, says Kinnel. These picks often do a relatively good job of absorbing the effects of a poor macroeconomic outlook.

Recession stocks. The economic devastation of 2008 debunked the myth that there is a wide array of "recession-proof" industries. But that doesn't mean that there aren't individual companies that tend to get a boost when consumers are struggling. In particular, stores that sell staple products at sharp discounts will often benefit from consumers who are suddenly hunting for bargains. Wal-Mart, for instance, was up 20 percent in 2008 as consumers took advantage of its low prices. Similarly, Ross Stores, a discount clothing chain, gained 17.8 percent that year. These companies, of course, are the exception rather than the rule. In 2008, for example, the average consumer staples mutual fund was down 25.6 percent.