Ever since 2010 began, pundits have mocked the stock market's lousy performance over the past 10 years, dubbing it the Lost Decade. As it turns out, though, only a narrow set of investments dropped in value since 2000 -- and as long as you didn't have all your money invested in them, then you would have seen gains in your portfolio.

Betting it all on one benchmark
It's true that when you look at one of the most popular measures of the market's performance, the S&P 500, you see a dire picture of what happened from 2000 to 2009. On average, the S&P lost about 1% each year, even when you include the dividends that its component stocks paid.

Looking at the top stocks in the index, it's not hard to understand where these losses came from. Technology stocks that were hit hard during the bear market that opened the decade, such as Microsoft (NASDAQ:MSFT) and Intel (NASDAQ:INTC), found themselves unable to recover their losses. The big victims of the more recent bear market in 2008, financial stocks like Citigroup (NYSE:C) and American Express (NYSE:AXP), performed reasonably well early in the decade. But they gave back all those gains and more during the financial crisis, and haven't been able to recover all their losses in the ensuing rally.

Many investors see investing in the S&P 500 as giving them adequate diversification. But if all you own is a stock index fund, you suffered losses when you didn't have to -- because you skipped some of the biggest moneymakers of the decade.

What you left out
The sad thing about what happened during the 2000s is that the S&P was just about the worst place for your money. When Morningstar took a look at how various indexes covering a wide array of asset classes did, it concluded that no matter where else you had put your money, you would've been better off than in large-cap U.S. stocks.

Take a look at some of the numbers:

Asset Class

Annualized Return, Dec. 1999 to Dec. 2009

Real estate investment trusts


Emerging markets equity


Long-term Treasury bonds


High-yield corporate bonds


Small-cap U.S. stocks


Treasury bills


International stocks


Source: Morningstar.

In light of recent performance, some of these may surprise you. Many REITs, such as Simon Property Group (NYSE:SPG), performed abominably during the 2008 bear market, but they enjoyed big gains early on and have seen fairly strong recoveries in the past year. Treasuries and corporate bonds have generally moved in the opposite direction lately, but overall, falling rates over the decade supported big price moves.

Even among traditional stocks, you had plenty of better choices. Although some of the best performing emerging-market stocks, like Baidu (NASDAQ:BIDU), didn't even exist in 2000, their contributions helped vault emerging indexes toward the top of the list. Moreover, even though they aren't really small-caps now, stocks like Green Mountain Coffee Roasters and XTOEnergy (NYSE:XTO) were a lot tinier 10 years ago -- and have given investors some spectacular returns.

Go beyond the average
The lesson here isn't that the S&P is a bad place to invest your money. Despite its bad returns since 2000, long-term investors can feel confident that the index will bounce back and give them gains in the future.

What you should take from the past decade, though, is that it's not enough to keep all your money invested in the same big companies. By making sure you own not only large-cap U.S. stocks but also some international stocks, bonds of various types, and alternative investments like REITs, master limited partnerships, and commodities, you'll have a much better chance of capturing good returns even when the S&P doesn't live up to your expectations.

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Fool contributor Dan Caplinger certainly doesn't consider the 2000s a loss. He doesn't own shares of the companies mentioned in this article. American Express, Intel, and Microsoft are Motley Fool Inside Value selections. Baidu and Green Mountain Coffee Roasters are Motley Fool Rule Breakers picks. Motley Fool Options has recommended buying calls on Intel and a diagonal call position on Microsoft. The Fool owns shares of XTO Energy. Try any of our Foolish newsletters today, free for 30 days. The Fool's disclosure policy always keeps the upper hand.