New Delhi, India

In the last few days, the global markets witnessed a significant crash as crypto prices fell and fear of a US recession loomed. The US and Europe markets were jolted by Japan's Nikkei 225 index fall which at one point was 13.4 per cent.

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When such volatility hits the stock market, it generally leads to panic selling - a move which has been highly discredited by all financial experts.

Experts have debated over whether to go for panic selling or do nothing when the stock market nosedives, but ace investor Warren Buffett has another formula to navigate through the dwindling stocks which is 'aggressive' buying. 

Even though panic selling is a big 'NO' for investors when stocks are crashing and their portfolios are dropping drastically, there are ways in which you can survive the bloodbath at the stock market. 

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Best ways to save your investment portfolios from downturn

1) Diversify your portfolio

Diversifying the portfolio by investing in funds and investment trusts of share-based assets is a safe option to keep yourself floated in tough times. 

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Such portfolios have a lower risk of facing a decline in comparison to the investments made in companies. The portfolios can have funds from different industries or geographic sectors which contain the impact of volatility. 

Also Read: Money-Wise: Ola Electric rides IPO market. Here's everything you need to know before investing

"One should look to Invest in funds which have a domestic theme like manufacturing as it will not have the risk of a global slowdown," said Siddharth Karnawat, co-founder of Blue Sky Capital while speaking to WION.

2) Invest in different assets

When the stock market is in a slump, the portfolio can also be protected with the diversification of investments into non-equity-based assets like property, commodities and bonds.

It is advisable to select assets which have no co-relations as the prices in every sector do not rise and fall at the same time. 

Investment in diverse assets like - government bonds, corporate bond funds, gold bullion, precious metal mutual funds, real estate investment trusts (REITs) and exchange-traded funds (ETFs) should lessen the impact of the stock market downturn. 

3) Understanding the right time to invest

When the stock market crashes, it becomes difficult for investors to understand when they should buy low/sell high stocks. 

A simpler option, which will have less impact of a market slump, is to invest monthly and not in lump-sum which helps investors benefit from ‘pound cost averaging’. 

In this case, the investors purchase more units or shares of the same amount in comparison to what they purchased a month before because of a fall in share prices, and hence, eventually pay the average price of the shares or units.

Watch: World markets quake over risks to US economy

Speaking about the correct time to invest in the Indian stock market, Karnawat said, "Whenever nifty PE is below historical Avg of 20 it is good time to Invest and whenever it’s above 24 it is overvalued." 

4)  Go for total return funds

The total return funds, which are also known as balanced or cautious funds, are aimed at ensuring capital growth in rising markets while also protecting the money of the investors when the stock markets crash.