The correct answer is      (B.) Convertible Bonds

The Dow Jones Industrial Average has just rallied more than 2,500 points, climbing from a March low near 6,500 to retake the 9,000 level. That's a furious +40% advance in less time than it takes to grow a tomato. But it also took less time than that to wipe it all out just a few short months ago. It's hard to know what to do next. Fortunately, there is a middle ground that allows investors to participate in a rising market without getting whipsawed if the bottom drops out.

Convertible bonds were made for this kind of volatile environment. Convertible bonds work like traditional corporate bonds, offering fixed, semi-annual interest payments. The difference is these securities come with the opportunity to convert into a pre-determined number of regular common shares at some point in the future. You don't have to convert if the common stock fails to budge or even loses ground. Just sit on the bond until maturity and your principal will be repaid in full while you collect regular interest checks all the way. This versatility is what makes convertibles the perfect all-weather asset class. According to John Calamos (whose firm manages nearly $5 billion in convertible assets), these securities typically capture two-thirds of the market's upside potential, with only one-third of its downside exposure.

You can look no further than the past six months to see this behavior in action. During the first quarter of the year when the S&P fell -11%, convertibles posted a +3% gain. And when the market perked up in the second quarter and rallied +16%, convertibles soaked up every bit of that gain. That's a risk/reward imbalance that anyone can appreciate.

Any many people do. More than 90 new issues have come to market since January, raising a combined $33 billion. Through the first half of the year, convertibles shined with a robust gain of +21% -- trouncing the +11% return of the S&P 500. After looking at a number of funds dedicated to this sector, StreetAuthority editor Nathan Slaughter has singled out the strongest candidates in his latest issue of The ETF Authority. All of Nathan's picks have posted double-digit year-to-date returns -- one ETF has run up a whopping +86%! -- and in the latest issue of ETF Authority, he explores two of his favorites. To learn the names of these ETFs, and to learn more about ETF Authority, please visit this link.