A. While you can own dividend paying stocks which tend to be less volatile, you can simple own some low-volatility ETFs as part of your core portfolio. Such low-volatility ETFs tend to perform better than bonds in times when economy is growing and rates might be rising.
One popular option is PowerShares S&P 500 Low Volatility ETF (SPLV), is it good for conservative investors.
If you are concerned about the high weight of interest rate-sensitive stocks in SPLV, another option is PowerShare S&P 500 ex-Rate Sensitive Low Volatility Portfolio (XRLV).
Finally, if you want to diversify the holdings to include foreign stocks, the Vanguard Global Minimum Volatility (VMVFX) is a good choice, its low expense of 0.30% certainly helps too.