(MONEY Magazine) – WHOA! YOU KNEW SOMEthing was happening in 1995 because practically every time you turned on TV, you saw the folks at the New York Stock Exchange milling around like ants and heard the ding-ding-ding of the closing bell. It wasn't until nearly the end of last year, however, that the news really registered. Standard & Poor's 500-stock index, the traditional proxy for the whole stock market, was up 33.3%. Many stocks and scores of the 3,247 mutual funds listed on page 114 did even better. And long-term bonds, which are usually pretty ho-hum, turned in 28%, which isn't too shabby either. If only you had invested $5,000 in stocks just after New Year's, you'd have had $6,665 to blow on Christmas. Maybe it's time to jump into the market.

Whoa, again. A little math will tell you that the future will not always look like 1995. If it did, a person your age--say, 25--could turn $2,000 into $83.1 million by the time you qualified for Social Security. But with your luck, the minute you invested two grand, the market would go flatter than yesterday's Snapple. Is there any way to know what you should really expect from investing?

That's a question for the ages, but it turns out that the only reliable guide--and, admittedly, it's not perfect--is the past performance of the three investment biggies: stocks, bonds and cash. (Cash, by the way, is not only the crumpled-up stuff in your pockets but also Treasury bills, money-market funds and bank accounts that can be easily converted into cash.) As a MONEY subscriber, you've probably already read that stocks rule. According to the Chicago research firm Ibbotson Associates, stocks have returned 10.2% a year, on average, going all the way back to 1926. Over the same period, long-term bonds gained 4.8% annually, and cash, as represented by Treasury bills, only 3.7%. There's nothing guaranteed about those numbers, of course. (If you want to know why you shouldn't count on that 10.2% in particular, see the Fund Watch column in the January issue of MONEY.) But it's a pretty good bet that if you can give them enough time, stocks are where you want to be.

Even the Great Depression would not have destroyed the investor who patiently kept plowing his dough into stocks. According to Jeremy Siegel, author of Stocks for the Long Run (Irwin, $27.50), if you put $15 a month in the stock market on the eve of the 1929 crash and kept doing it for the next 20 years, you would have accumulated $9,000; after 30 years of diligent investing, you'd have $60,000, a 13% annual return. If you had parked that money in a bank account paying the 3% interest that was then standard, you would have only $4,925 after 20 years and $8,741 after 30. The primacy of stocks holds in more recent market dips as well. Says Derek Sasveld, a consultant with Ibbotson: "If you had made the worst decision and invested at the top of the bull market in 1987 right before the crash, you'd have made your money back in 18 months."

One reason stocks consistently end up on top is that unlike other assets, they offer you a sliver of ownership in a company--or in many companies if you invest in a stock mutual fund. Because the population is always expanding, and, with it, the bottomless desire of consumers to purchase more and more stuff, companies tend to keep growing in profits and revenues. Thus your share of ownership becomes more valuable.

By contrast, bonds are basically loans that you make to big-time borrowers like Uncle Sam or California or General Motors. In return, you get interest each year until the loan matures and you get your capital back. You can't go too far wrong with bonds as long as you hold them to maturity and the issuer is able to keep paying the interest and principal when due. There just isn't much growth to them. Cash earns interest at whatever rate banks or money-market funds happen to be paying, which is usually pretty close to the rate on Treasury bills, which in turn is usually pretty close to the rate of inflation.

Sadly, each investment has its downside. As a stockholder, you are a part owner, so if the company goes bust, as some do each year, bye-bye dough. Or as Homer Simpson would say, "D'oh!" What happens more often, however, is that the company simply doesn't do as well as you had hoped, and the price of your stock sags or sits there like an abandoned pizza crust.

Bonds are not fail-safe either, because they are very sensitive to interest rates. The mechanics are fairly simple: When rates go up, the value of your bond goes down, and vice versa. You can also go wrong with cash, thanks to inflation. To make you better off in the long run, your money has to grow faster than the price of things you're going to buy with it. But since cash grows at roughly the same rate as inflation, it leaves you roughly where you started from.

The problem with generalities about investment returns--these included--is that they work best over a few decades or more. Look at the S&P 500's returns in the graph on the previous page, for example. You'll see that over five-year periods, stocks' annual rate of return after inflation was all over the map. Ditto for 30-day Treasury bills. But over 30 years, stocks always beat inflation. The conclusion? The more time you have to invest, the more likely you are to gain from stocks.

You can afford to be cool about the ups and downs of the market if you don't have to cash out until retirement some 30 or 40 years from now. According to Jeremy Siegel, stocks have produced an after-inflation return of 6% to 6è% when you look at 30-year periods, so you can reasonably expect the same return no matter what happens in the meantime. But what about the money you're saving to buy a car next year or a condo in five years? If stocks collapse, you could be taking the bus and still living at Mom's. Therefore, stash money you'll need in a year or two--so inflation doesn't make much difference--in a money-market fund where you'll get a for-sure return. But for five-year and longer-term goals, stocks are the way to go.

Finally, when you do invest, don't lose your skepticism. Sure, you want to bet on the favorite, but be sure it's for the marathon, not the 100-yard dash.