Well, how else do you recover a rocket intact?
Parachutes have lots of trouble. The rate of descent they achieve is still fairly fast, so you need something to brake the descent at the end.
This is why various American capsules splashed into the ocean, as well as the Shuttle boosters, because the water acts as a cushion. However, dunking your delicate rocket in salt water is a bad idea. The American capsules weren't reused, and the Shuttle boosters required enough refurbishment afterwards as to make it not really worth recovering them.
You can land on land, but then you need some seriously hefty landing gear, or retro-rockets. The Soviets use retro-rockets fired at the last moment to recover their capsules on land. A rocket has problems that a capsule does not, though, namely that you need to keep it from tipping over once it lands! You can make a capsule fat, but a rocket really needs to be tall and thin, and any sort of horizontal velocity will have it falling on its side. You also have very little control over where the rocket comes to a rest. Again, tolerable for a capsule, but dropping your rocket into a forest is not going to be conducive to reusability.
You can add wings, like the Shuttle did, and land horizontally. Trouble with that is that wings are extremely heavy. Each pound of wing in the Shuttle was a pound of payload it couldn't carry. If you try to fit every stage of a rocket with wings so it can come back and land, you'll end up not having much excess capacity left over to actually carry a payload. Wings are great for aircraft, when you can use them to efficiently fight gravity for the whole flight. But they suck for spacecraft, where they don't help at all on the way up, and are just dead weight for most of the flight.
So landing a rocket vertically on its engines isn't really all that bad in the end. Inelegant, perhaps, but it has a lot of advantages. You get absolute control over where the rocket lands. You can land it as softly as you like. You can ensure that it touches down with no horizontal velocity so as not to tip over. You use the same engines that you used for the launch, so there's no extra weight there. The only real downsides are the need for some sort of landing gear, and the need to carry a bit of extra fuel. Neither one is all that bad.
When considering the stability, don't make the common mistake of comparing it to balancing a pencil. When the rocket turns, the motors turn as well, so it is not inherently unstable the way you might think. Rather, the stability is neutral: if you perturb the rocket, it will just stay in its new position, not returning to how it was before, but neither does it run farther away. A rocket that's slightly tilted will stay slightly tilted (gradually accelerating sideways, of course), it won't tilt over further the way a pencil does.
Note that Robert Goddard made this same error. He built his first rocket with the engines at the top, believing this would help with stability. So if you were thinking that way, don't feel bad: the father of modern rocketry did the same thing!