Remember all that talk about whether we were entering another Great Depression? Much of it has subsided since the 30% rally in the S&P 500 and the sprouting of the economy's supposed "green shoots" (or, as skeptics call them, "yellow weeds," "Venus flytraps," or "poison ivy accidentally used as toilet paper").

But you'll still find doomsayers who think the worst is yet to come. (And I mean "doomsayers" in a good way -- there should be a little part of all of us that expects the worst and plans accordingly.)

Whether or not our current less-bad economy -- when most economic metrics are still ugly, just not as ugly as they used to be, sort of like me in college -- is really an indication of "green shoots" or more like the worm-like tongue of the alligator snapping turtle remains to be seen. But I can tell you this: By one metric, it's already worse than the Depression.

According to Ibbotson Associates, of the 74 rolling 10-year periods since 1926 (i.e., 1926-1935, 1927-1936, and so on), U.S. large-cap stocks posted negative returns in just three of them. The first two were 1929-1938 (-0.89% compound annual return) and 1930-1939 (-0.05% compound annual return), and involved the Depression. The third loser decade was the most recent -- and the worst. From 1999-2008, U.S. large-cap stocks "returned" a compound annual average of negative 1.38%.

Who would have thought back in 1999, when we were more worried about Y2K than our 401(k), that in the subsequent decade big-name American stocks would do worse than they did in the 1930s? Not many.

It didn't have to be that bad

It feels like a punch in the gut -- hold on to stocks for 10 long years, and still be underwater.

But wait. Some investors did see their portfolios grow over the past decade. How did they do it? By owning asset classes other than U.S. large-cap stocks.

In my Rule Your Retirement service, I have created model portfolios that contain 10 to 12 asset classes. Let's take a look at how a few fared over the past 10 years using mutual funds (mostly of the index variety) to measure their performance, compared with an investment in the Vanguard 500 (FUND:VFINX) , our proxy for U.S. large-cap stocks.

Portfolio Investment(s) Total 10-Year Return $100,000 Turned Into ... 100% U.S. large-cap stocks One fund (22.8%) $77,160 100% stocks, of all sizes and countries 10 funds 31.4% $131,414 70% stocks, 30% bonds 11 funds 47.3% $147,325

Source: Morningstar Principia software, May 1, 1999, to April 30, 2009. Portfolios are rebalanced annually.

While those returns won't turn a pauper into Prince (or whatever his name is these days), they're still better than losing money. And investors who had these more-diversified portfolios ended up with almost twice as much money as someone in an S&P 500 index fund.

What makes these portfolios different? They're built with funds that invest all over the world, in stocks of all types and sizes. They still have the big-name American companies -- such as Microsoft (NASDAQ:MSFT) and IBM (NYSE:IBM) -- but also small stocks, such as Seagate Technology (NASDAQ:STX) and ImmunoGen (NASDAQ:IMGN) . And they're not limited to America, either, including funds that invest in stocks like Nokia (NYSE:NOK) and China Mobile (NYSE:CHL) .

And then there's boring old bonds, which made up 30% of the third portfolio. You should own them if you're within a decade of retirement, or just can't stand the volatility and, perhaps most important, uncertainty of an all-stock portfolio. Of the portfolios above, the one with bonds did the best.

Hope for the future

Just as in the 2000s, holding bonds beat an all-stock portfolio in the 1930s. However, it wasn't until the 1970s that bonds once again reduced risk and boosted return over decade-long time frames. In each case, one bad decade for stocks was followed by a multidecade run of good returns. Put another way, since 1926, U.S. large-cap stocks have never posted two consecutive decades of losses. That gives us some hope for the coming decade.

Of course, there's a first time for everything. In 2005, Ben Bernanke, then an advisor to President Bush, said on CNBC, "We've never had a decline in housing prices on a nationwide basis. What I think is more likely is that house prices will slow, maybe stabilize ... I don't think it's going to drive the economy too far from its full-employment path, though." Well, we've since had our nationwide decline in housing prices. (That gnawing sound you hear is Mr. Bernanke eating his words.) Given that history is a useful yet imperfect guide, it's likely -- though not guaranteed -- that stocks will post decent returns over the next decade.

So for those near or in retirement, or for conservative investors of any age, using bonds to balance the risk of stocks makes sense. And every investor should hold stocks of all shapes, styles, sizes, and nationality. (If you'd like to see how I do it, take a 30-day free trial of my Rule Your Retirement service.) It would be grand to know which type of investment will do best over the next decade. But until you've fixed your crystal ball or perfected time travel, a smartly created, well-diversified portfolio should be the foundation of your retirement savings.

Robert Brokamp tries to cross bridges before he comes to them, and gets balder every day. He owns shares of VFINX and Nokia. This article is adapted from a recent issue of Rule Your Retirement, which is available with a 30-day trial at the low, low price of free. Nokia and Microsoft are Inside Value picks. The Fool has a disclosure policy.