Mayhem in the stock and housing markets is painfully real to Paula Bostick. She's lost a lot of money. At least she hasn't lost her sense of humor.

"My husband, John, will not make a nice greeter at Wal-Mart," she said.

Working for a firm that supplies plastic parts to carmakers and building firms, he's vulnerable to a layoff. But neither he nor Paula, both in their 50s, can afford to retire.

John's 401(k) account balance has been slashed by nearly 50%. Paula's IRA is down nearly 60%. She is a continuing-education teacher in California. But her 403(b) account — the teaching world's version of a 401(k) — is off 50% from its peak.

Worst case? Another Paula quip: "My husband says we'll dig out the grass lawn and plant corn."

Now she's gone to cash in her accounts and wondering what to do with future contributions. She has lots of company.

"People are afraid of the stock market," said Stephanie Giroux, chief investment strategist for brokerage TD Ameritrade. "But they want their money to work. They don't want it parked in cash indefinitely."

Many retirees and people nearing retirement are solving that dilemma by shifting their money into alternative investments, says Hugh Bromma, chief executive of Entrust Group, a custodian for self-directed IRAs and 401(k)s.

Most people invest in mutual funds through their IRAs and 401(k)s. Self-directed investors tend to branch out.

In their taxable as well as retirement accounts, clients boosted alternatives to a 45% share of assets from 30% over the 18 months ended Jan. 31, Bromma says.

His clients' favorite alternatives:

• Notes or loans to local private businesses.

Lending to local businesses takes advantage of the credit crunch. "Businesses have been willing because they haven't been able to get bank loans," Bromma said.

Typically, lenders and borrowers know each other. Lenders make loans at rates three to five times higher than what they could get by locking their money up in certificates of deposit for comparable periods, Bromma says.

"They do more due diligence than banks," he added. "And loans are usually secured by real estate or equipment."
Annualized returns are generally 12% to 15%, Bromma says.

He points out that two-thirds of lenders are making money. But that's down from August's 80% success rate.

The slowing economy is forcing many who borrowed since September to default.

• Gold. Most clients have invested directly in bullion rather than in gold-mining stocks. "They want a pure play in the metal's run-up," Bromma said.
He added: "Everyone has made money. But they've got to be ready to get out on short notice when bullion stops climbing." That could happen when stocks rally.

• Foreign exchange. "This is very risky if you don't know what you are doing," Bromma said. "Only investors who take a professional approach succeed. And that means investing in expensive software."
Prices for many programs start at $20,000. Some traders require three or four programs running at the same time on as many computers. "Many specialize in one or two currencies," Bromma said.

• Oil and gas. These investments are typically made through a limited liability corporation or partnership.
In turn, the LLC or LLP takes a position in an energy firm. Many specialize in exploration or production. Some focus on a single field or even a single well.

Why not invest in a larger, publicly traded E&P firm? "These investors want to deal directly with the developer," Bromma said. "This lets them visit a site. But it lacks the diversification of investing in a larger firm."
He says investors basically fall into two groups: 20% who invest through professional organizations, and 80% who do their own research and due diligence. Of the former, 80% to 90% have made money. Few if any taking the amateur route have.

• Commodities. "Most of these investors simply have a trading account with a commodity dealer at someplace like the Commodity Exchange in Chicago," Bromma said. "You can trade anything from base metals to wheat, pork, whatever."
The one thing successful investors in alternative assets have in common is a serious approach.
"Just because something is an alternative does not mean you can make a casual effort," Bromma said. "People who make money put serious time and money into learning how their asset works."