Having experienced the classic definition of a "bear market," it's understandable that your portfolio has felt the hurt.

However, sooner or later, our financial system will work through the problems that triggered the market stumble, and stocks will rebound in a big way. In fact, seeing the Dow recently close up over 300 in one day is evidence the tides have already begun to change. It is indeed possible to survive a recession.

It would be foolish, however, for us to pin our hopes on a recovery without learning a few things from the "school of hard knocks" we've just been put through. While no two periods of market history are exactly alike, certain patterns do recur.

By taking to heart the lessons of the past, I've been able to help my Profitable Investing subscribers deal with similar challenges as they arise. Because of this, during some of the hardest market times, their portfolios have been able to rise to the challenge (see also, "How to Play the Transition From Bear to Bull").

Taking into account the horrible market activity we've all been going through these past few months, I'd like to share with you some of the best advice I can possibly give you on how to survive recession and prosper going forward.

Advice Part 1: Embrace Cash

When the stock market is booming, investors are generally loath to hold much cash. Who wants to earn 3% or 4% in a bank account or money market fund when you could be pulling down double digits, and it all seems so easy?

Yet, as we found out last summer and autumn, the capital markets can tumble into a ferocious tailspin with very little warning. Moreover, the ultimate depth of the plunge is often impossible to estimate accurately in the early stages.

There's only one true insurance policy against such "blizzard in July" events. Hold enough interest-bearing cash to tide you over. For added safety...