If a device existed that could monitor investors' stress levels, alarm bells would have been sounding and red lights flashing for most of the last year. The economy remains sluggish and its signals confusing, curbing the appetite for stocks. Meanwhile, the tradeoff between the tiny stream of income that bonds can generate and the rising level of risk don't compute.

Little wonder, then, that product providers are pitching their investment vehicles as "alternatives," and advisors are filling the holes in client portfolios with the growing panoply of such investments. Alternative investments that can help diversify a client's portfolio and boost absolute returns certainly already exist. After all, the price of gold, one of the most venerable alternative investments, has doubled in the last three years, and hedge funds, a newer arrival, are posting returns that outperform standard stock market indexes.

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