stocks
bonds
real estate
cash
gold
miscellaneous
asset allocation

One of the most important decisions you will make regarding the future return of your money won’t have anything to do which fund or stock you are buying, but rather, how you spread your moneys around.

By spreading your investments into assets with low correlation you can diversify some of the risks of the total portfolio away, thus reducing the volatility without sacrificing performances.

This decision of which asset classes you need to use, and how much on each you will need is called asset allocation.

Different studies find that up to 90% of the return is determined by the asset allocation, rather than the decision, which specific fund is employed.
But underlining these studies is a fact so basic, it is often overseen, but still most people are tested hardest with it:
Stay the course, stick to your chosen asset allocation and ignore the noise and chatter of the market, the media and above all, your neighbor. Most portfolios fail because their owners pull out at the worst possible moment (when an asset class is doing badly) only to jump onto the next "hot" asset class, usually when the same has just reached new all time heights.

So while the use of index-based instruments is just the technique to be used, much more thought should be put into finding a sufficiently diversified portfolio, and after setting the whole thin up to promptly forget about it again.