If stocks look risky, so do bonds and cash and lots of other investments. The depth of the 2008 financial crisis, and the follow-on efforts by the Federal Reserve to prop up the economy, have left short-term interest rates in the US near zero. So people have gotten used to earning next to nothing on savings or money-market accounts. Interest rates on 10-year Treasury bonds, which had edged up amid signs of tentative economic recovery, sank to historic lows as of September 2011. And bond prices could dive, eventually, whenever the economy firms up.
Other alternatives like real estate and commodities can bring returns to savvy investors, but can be as volatile as stocks. Gold soared to record prices this year, but earns no interest and could plunge in price if the sense of economic crisis eases.
The upshot: An investment landscape that's all about picking lesser evils won't feel very inspiring.
On another level, though, the problems with fixed-income and alternative investments simply nudge investors back toward stocks. After all, why earn 2 percent on a bond when some blue-chip stocks are paying more in dividends? Many investment strategists believe stocks will outperform bonds handily over the next decade, even if the returns may not be stellar.
