BOSTON (TheStreet) -- Scared investors, some ready to put their life savings under the mattress after the stock market's stomach-churning volatility of the past few days, are being told by professional investors to stay put. The biggest gains come from sudden rebounds, while a diverse mix of assets helps cushion blows when stocks take a nosedive.

The

Dow Jones Industrial Average

lost 635 points Monday and jumped 430 points Tuesday following

Standard & Poor's

unprecedented downgrade of U.S. debt after the stock market closed Friday. The Federal Reserve on Tuesday pledged, in an unusual move, to keep interest rates near zero for another two years as the economy weakens.

"Fear appears to be rampant," says S&P Equity Research, which operates independently of S&P Ratings Services, an organization that some accuse of sparking the market's sell-off Monday with the downgrade. "(But) for the prudent investor, overwhelming fear can often translate into good opportunity, in our view."

Similarly,

Janus Capital

, which manages $170 billion in assets and is known for its growth-style mutual funds, says "it's important for investors not to act rashly in this climate. Giving in to fear is not an option for us."

The stock market was approaching a bear market Monday when the

S&P 500 Index

closed down 17% from its April 29 high and tumbled 15% in two weeks to that day. It clawed back 4.7% on Tuesday.

But in the conundrum that is the investment environment of today, while the markets gyrate, corporate earnings are going gangbusters. S&P's Capital IQ unit reports that consensus S&P 500 companies' estimated operating earnings per share are expected to rise 17.8% this year and 12.4% next year. Still, S&P's Investment Policy Committee placed the risk of recession at around 35% in an Aug. 5 research note, and on Friday S&P's Ratings Services unit downgraded the nation's debt from triple-A to double-AA plus for the first time in history.

So there are plenty of reasons for investors to be confused and scared.

Here are the recommendations of market experts and mutual fund companies to their investors over the past two days:

The consensus:

Don't panic and start shifting assets around just because their value has dropped, because investors who make major changes in a market downdraft usually lose out on big, early-stage gains when a recovery starts, as happened to many in 2009.

Portfolio diversity will help reduce risk and volatility, so a mix of stocks, high-quality corporate bonds, certificates of deposit and diverse mutual funds with an exposure to international markets will help reduce volatility and provide a floor in a prolonged market downturn.

When buying stocks, it's best to go with high-quality companies with 10-year track records of steady earnings growth, a healthy amount of cash on the balance sheet, and that pay a steady dividend.

Janus Capital:

The mutual-fund company's biggest concern is economic growth, "which is clearly slowing," according to a post-Treasuries downgrade commentary Monday. "The biggest question in our minds is how consumers will react to negative headlines and fundamentals," including the rising pace of layoffs, the uncertainties created by the debt-ceiling debate and the U.S. sovereign downgrade" because if they stop spending things will get worse. "In addition, we believe the U.S. is clearly entering a period of fiscal austerity and we need to be cognizant of this when investing.

"While we are positioned more defensively, we don't believe a return to the 2008 crisis environment is a high probability event. The next flight-to-quality trade may be to the highest-quality companies."

Fidelity Investments:

"Don't make major changes to your investments." Rather, take this time to review objectives and compare them to the performance of your portfolio. Only then should you rebalance your portfolio according to set goals, years to retirement and appetite for risk.

"The reality in today's markets is that more and more supposedly different types of assets seem to move in tandem, as they did in 2008," writes Fidelity's Roger Fillion. "That means you'll need to sharpen your strategy to achieve true diversification."

Fidelity, which manages more than $1 trillion in mutual-fund assets, says it's best to own stocks, bonds and short-term investments like CDs and money-market funds that typically don't move with stocks, giving your portfolio a layer of risk reduction. It's also important to have geographic diversity, which can be obtained by investing in multinational companies.

Mutual funds and exchange traded funds that are free to invest worldwide can provide instant portfolio diversity.

Morningstar:

Christine Benz, the fund-rating firms' director of personal finance, says it's particularly important "to make sure that you have adequate cash on hand to cover your near-term needs. That way, your long-term stock investments can do what they're going to do," but you'll be able to sleep nights knowing the bills will get paid.

"If you have cash to invest or are in the process of moving around existing holdings, do so with a contrarian mind-set" but choose defensive hedges with care.

Gold, Treasury bonds and bear-market mutual funds that are shorting stocks (betting on declines) have all benefited lately, but the long-term performance of bear-market funds prove investors can be eaten alive.

Gold and Treasuries can serve a legitimate defensive role in a portfolio, Benz says. However, both have already seen a sizable run-up. And if you own funds run by active managers, those funds might already have exposure to them, so it's worth checking their portfolio allocations.

Riverpark Capital

: Mitchell Rubin, a 17-year investment-industry veteran and a portfolio manager at the $100 million RiverPark Mutual Fund firm, says the recent downturn represents a buying opportunity for his firm, which is growth-stock oriented.

"Most of our best purchases come after a market sell-off," which in this case is a so-called macro-economic event that shouldn't impact the performance of the companies in his funds' portfolios, he says.

"Most of our companies reported second-quarter earnings that were fantastic," including iPhone and iPad maker

Apple

(AAPL) - Get Report

;

Equinix

(EQIX) - Get Report

, a provider of network-neutral data centers; agricultural-products giant

Monsanto

(MON)

and

Blackstone Group

(BX) - Get Report

, one of the biggest private-equity firms in the world.

"We don't invest in cyclical businesses or banks or companies with complex balance sheets," he says. Rather, the firm's stock picks are focused on companies that generate lots of cash, don't have much debt, are in industries with a secular growth theme, and have healthy international exposure.

Citing Apple, Rubin says that "the increased mobility of society isn't going to be slowed down because the U.S. credit rating was cut by one notch. So if we can buy a company at a discount because there's a market sell-off we'll take advantage of that."

The

RiverPark Large Growth Retail Fund

(RPXFX) - Get Report

lost 14.6% in the three-month period ending August 8 versus the 16% decline of the S&P 500 index in that period.

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