Bill DeSio pulled off a neat trick during the crash: Even as his portfolio sank, he shrugged off his anxiety and scooped up blue-chip stocks on the cheap, making a killing. Today, more than a year later, the insurance executive from Springfield, Pa., is ready to change direction. Anxious about the stock market s recent dips, the 63-year-old DeSio wants to lock in his gains. I ve been working all my life, and I don t want to lose everything, he says. But he s not simply fleeing into savings accounts or CDs. Among his more intriguing buys are investments that generate a substantial stream of cash, including hybrid convertible bond funds that offer high dividends. His new mission: Get a significant income out of his portfolio, no matter what stocks do.

“ VIDEOS ”

“ With rattled investors considering alternatives to the Dow-Nasdaq roller coaster, we talk with Matthews Asia portfolio manager Jesper Madsen:

* Investing for Dividends in Asian Markets
* In Asia, Dividends Can Signal Strength ”

Unlikely though it may seem, most Main Street investors are in far better shape than they could have imagined when the market bottomed last year. But after more recent events that reminded them how volatile the markets can be, more of them are channeling their inner hedge fund manager, looking for stable investments that don t leave them at the mercy of the Dow-Nasdaq roller coaster. At the same time, they want holdings that can pay off and keep their portfolios growing so they re exploring sophisticated options that mom-and-pop investors have often shunned. So far this year, for example, global real estate investment trusts have seen their cash inflows jump by 50 percent, compared with the same period in 2009, while emerging-market bond funds recently had their biggest cash-inflow month in history, according to fund-research firm EPFR Global. These assets pose plenty of risks, but consumers and planners are seeing them as sources of cash and potential counterweights to stocks.

To be sure, venturing into unfamiliar investment territory presents savers with a steep learning curve. Virtually no advisers suggest clients go all in on assets like, say, pipeline partnerships or Asian dividend stocks these options are complements to, not replacements for, meat-and-potatoes stock holdings. What s more, the coming months could pose all kinds of challenges. Some analysts fear that rising interest rates or European debt woes could hurt many types of assets, especially bonds; while investors seeking income from dividend-paying companies or from trusts and partnerships will still have to deal with the palpitations of the stock indexes and even (gulp) the housing market.

Still, many pros think these tactics provide some shelter from the huffing, puffing wolf of stock volatility. These investments, after all, concentrate on assets that pay steady income. And some emphasize foreign markets, offering a cushion if the U.S. economy stays shaky. Indeed, David Darst, chief investment strategist for Morgan Stanley Smith Barney, sees them as sleep-at-night investments. For investors thinking of tweaking their course for the rest of 2010, here are some options we found after canvassing advisers and money managers.

Photography by Jeff Harris

MLPs & REITs

It s easy to feel unnerved when faced with a pack of unfamiliar acronyms. But Zeke Ashton, comanager of the Tilson Dividend fund, recently delivered comforting returns to his shareholders with the help of an alphabet soup of investments. Ashton says he s reaped good results in part by buying master limited partnerships, or MLPs, and real estate investment trusts, or REITs including one REIT, Annaly Capital, that pays a 16 percent dividend.

That isn t a misprint. REITs and MLPs are required by law to pay most of their taxable income back to investors. So pros increasingly see them as a way to collect a substantial return, even when markets flatten or fall. Yields as high as Annaly s are rare its dividend is high in part because fears about the housing market have sunk its shares but dividends in the 5 to 7 percent range are common. Most REITs and MLPs trade like stocks, and they ve been hot lately. The Dow Jones Equity All REIT index rose 10 percent in the first quarter of this year, more than doubling the return of the S&P 500; and the Alerian MLP index is up 83 percent since 2008. (Indeed, manager Ashton has sold some of his holdings in these sectors, taking profits.)

With the real estate outlook still iffy in the U.S., many advisers say the best way to play REITs is to invest both here and abroad. The T. Rowe Price Real Estate fund has been a top performer in domestic real estate over the past decade, avoiding the most volatile assets; overseas, funds like the SPDR Dow Jones International Real Estate ETF are building large stakes in Australia, Japan, the United Kingdom and Hong Kong.

For those to whom the words real estate still sound toxic, MLPs may be a more comfortable pick. Most invest in energy-related assets like pipelines, collecting income by transporting and storing oil and gas, no matter what happens to energy prices. WHG Income Opportunity fund manager Mark Freeman likes Enterprise Products Partners and Boardwalk Pipeline Partners, both of which pay investors around 7 percent.

Bonds

Bill Ward got through the worst of the crash by turning off his cable TV and throwing his investment statements unopened into drawers. The ostrich approach helped him stay invested in stocks and recover during the big rally. But this year Ward, a retired sales executive from Provo, Utah, has decided not to press his luck: He s moving money into bonds. And his adviser, Ray LeVitre, is sending some of that bond pot abroad.

Of course, after recent turmoil related to debt problems in Greece and elsewhere in Europe, foreign bonds don t seem like an obvious safe haven. But most economists agree that interest rates in the U.S. will rise in six to 12 months; when they do, U.S. bond owners will see the prices of their holdings go down, while their interest payments become less attractive. One countermove, many advisers say, is to buy abroad. Unlike worldwide stock markets, global bond markets don t often move in tandem with one another, says Chris Diaz, comanager of the ING Global Bond fund so foreign holdings can help investors if the U.S. market looks weaker.

Bond pros say some of the best opportunities lie in emerging markets like Brazil or Indonesia. These economies escaped the worst of the credit crisis, and many now have lower debt levels than the U.S. Scott Mather, managing director for global bonds at Newport Beach, Calif. based investment firm Pimco, says that many emerging countries enjoy stable growth, but that their government bonds pay higher dollar-denominated yields 5 or 6 percent a year, versus 3.2 percent for a comparable U.S. Treasury bond because investors still perceive them as risky.

That s not to say foreign bonds are risk-free, of course; rising interest rates can hurt them, too. Emerging-market currencies can be volatile, and when the value of a currency drops in relation to the dollar, so does the value of its interest payments for an American investor. For that reason, many planners direct clients to bond funds that hedge against currency risk. Pimco s emerging-market bond funds, which have strong track records, are available in two flavors: one that s hedged against the effects of currency fluctuations, and one that isn t. Over the past year the two funds have performed almost identically.

Convertibles

Money managers sometimes describe convertible bonds as the chicken way to play stocks. That s not meant to be dismissive hey, sometimes investors really need the eggs. Converts, as they re known, are bonds that are exchangeable for shares of a company s stock. They don t pay as much interest as true bonds, but they often yield more than an investor would get from the stock s dividends. If a company s bonds pay 9 percent, explains John Calamos Sr., manager of the Calamos Convertible fund, its converts might pay a still-respectable 5 percent.

Why not just buy a bond? Converts prices typically fluctuate with the price of the stock giving investors a greater shot at selling for a profit than they typically get with corporate bonds, whose prices tend to be more stable. In theory, the chicken convertible investor can cross the road and swap the bond for shares if the stock appreciates. In practice, many money managers say, the combination of income and a price increase means it s usually better to hold on to the convertible. On the other hand, if the stock goes nowhere or falls convert owners have some protection; they can hold the bond to maturity and get their principal back. (If it all sounds a bit too good to be true, sometimes it is: Companies usually have the right to call their converts at any time, requiring the bondholder to convert them to shares or sell them back at the call price.)

Some converts that managers like include bonds from chipmaker Intel that mature in 2019 and others from generic-drug giant Teva Pharmaceuticals that mature in 2026. But since converts are hard to buy directly, planners usually direct interested investors to funds like Calamos; another option, Northern Income Equity, owns dividend-paying stocks and other investments, as well as converts.

Dividend Stocks

Gary Flam, managing director and portfolio manager at Bel Air Investment Advisors in Los Angeles, knows customers are still skittish about stocks. But he successfully rode one kind of stock high-dividend payers through the downturn, and today, he s still buying. Flam considers a dividend, a share of a company s earnings passed along to stockholders, to be a sign of reassurance. And if a stock s price dips, he adds, a dividend tends to cushion the blow.

Notwithstanding BP s recent decision to suspend its payout, dividend-hunting investors are generally seeing some encouraging signs. Companies like mining giant Freeport-McMoRan Copper & Gold and cruise line Carnival have reinstated dividends they suspended during the crash; in all, 157 companies increased their dividends in 2009, and at least 108 more have already done so this year, according to Standard & Poor s. That could mean executives believe their companies are getting their mojo back, says Henry Sanders, manager of the Aston/River Road Dividend All-Cap Value fund: Dividend increases are the best legal source of insider information.

As with bonds, managers say, for dividends the best opportunities right now may be overseas. The average dividend yield for S&P 500 firms is 1.9 percent; for the MSCI World index, which excludes the U.S., it s nearly 3 percent. In Asia, dividend growth hit double digits in 2008 and 2009 and should continue that pace this year, says Jesper Madsen, comanager of the Matthews Asia Dividend fund. Of course, dividends can be slashed if a company s fortunes take a sour turn, so diversifying among many stocks is a strategy that planners say they favor. Funds like Madsen s, and ETFs including Claymore/S&P Global Dividend offer investors exposure to dividend payers abroad while spreading their risk across a range of companies.