In the past year, Ned Petrucci has overhauled his investing strategy. The 61-year-old printing-sales representative in Atlanta had invested in nothing but stocks and bonds through the technology and housing busts. But now, after a 35 percent postcrash hit, plus the threat of inflation and a volatile stock market, he knew he needed a new strategy. This time the fix is an easy one, he says. For him, that fix means what the pros call alternative investments.

Alternative assets covers a lot of territory, but they all have one thing in common they re typically not correlated with stocks. That means when the stock market is taking a hit, these investments are not; maybe they re even going up. Some can also lessen the impact of, or even profit from, inflation. Petrucci s alternative investment of choice is gold, which tends to rise as the dollar (and, often, stocks) falls. While the market fell 29 percent in the past year, for instance, gold saw only a 2 percent dip. Some advisers are pointing their clients in other directions and encouraging them to devote a bigger chunk of their portfolio to alternatives. That goes for conservative investors as well, says Erik Davidson, managing director of investments at Wells Fargo Private Bank, who is advising virtually all clients to opt for alternatives. You re not looking for a home run, Davidson says. It s a shock absorber. Something that zigs when everything else is zagging. More than $7 billion has gone into alternative mutual funds this year, versus $5.2 billion over the same period a year ago. Now that gold has gotten more expensive, many planners are looking at other commodities like oil and grain. One favorite mutual fund among savvy planners is Harbor Commodity Real Return Strategy.

Many planners are gravitating toward alternative funds that use derivatives. Lee Munson, chief investment officer at wealth manager Portfolio LLC, admits that many clients equate derivatives with the kinds of disastrous bets Wall Streeters made before the crash. But not all derivatives are created evil. One of the most popular types of derivative is the stock option, which is why Munson likes the Gateway fund, a big-company stock mutual fund that also sells options, for scaredy-cats who want equities. The options limit the amount the fund can rise but also how far it can fall; it does best when the market is a roller coaster going nowhere, says Munson. In other words, it helps investors get more for their money when the market is wobbly.

Also See:

• Put Your Cash to Work: Stocks
• Put Your Cash to Work: Bonds
• Put Your Cash to Work: Real Estate