Unless you've been trapped on planet Pluto for the last decade, you know that the 1990s witnessed the motherhood of Madonna, the return to space by John Glenn and the biggest bull market in U.S. history. Between 1990 and 1999 alone the stock market more than tripled.

And while stocks have not always performed so extraordinarily -- compounding at a dazzling 18.1 percent annual rate for that time period -- they have usually been the best performing asset class over time. Since 1926, stocks have returned an annual average of 11.4 percent. Over the same period, government bonds returned 5.1 percent, and "cash," the term used to describe Treasury bills and other short-term investments, has returned just 3.8 percent. (This according to the folks at Ibbotson Associates in Chicago, who pay close attention to such things.) In other words, if you're investing for the long-term -- which just about everybody does now that 401(k) plans are the rage -- stocks are the place to be. (To see how each of these asset classes has performed after inflation, jump to "The hidden peril".)

If you're looking to invest money you may need in a year or two, the stock market can be downright dangerous. Look no further than the Dow's 554-point drop -- a 7.2 percent loss -- on October 28, 1997, and the 508-point drop on Oct. 19, 1987 -- a harrowing 22.6 percent loss -- to see what a difference a day can make. Then there are those bloody bear markets, like 1973-74, when stocks fell 44 percent, and 1968-70, when stocks fell 37 percent, to remind you that the market may not be the best place to keep your downpayment for a house.

To cite a worst case example, if you had bought the stocks in the Dow Jones industrial average at their peak in early 1966, you wouldn't have made any significant profit until mid-1983 -- more than 17 years later!

Bonds of course are another story. And while they won't give your portfolio the kind of kick that stocks will, nor are they likely to give it the same kind of thrashing. In 1994, the worst single year for bonds in recent history, intermediate-term government bonds (that is, Treasury securities with maturities of 7-10 years) fell just 1.8 percent. And in a good year, like the one that immediately followed, they bounced back an impressive 14.4 percent.

In the sections to come, you'll find a brief overview of stocks, bonds and mutual funds and a first look at the deleterious effects of inflation. We'll have more to say about all of them in future Money 101 lessons.

Next: Stock market movers