If I know you, chances are you have significant cash to spare. Agh, what a burden! What should you do with all that cash?

You can invest it, of course! Grow it, rather than let inflation make it worth less over time. Ride the market with index funds.

An index fund tracks an index, a specific basket of individual investments. For example, SPY (the SPDR S&P 500 ETF Trust) tracks the S&P 500 index, which comprises around 500 of the largest companies listed on US stock exchanges. When the S&P 500 grows 20%, SPY returns around 20%; when the S&P 500 shrinks 15%, SPY returns around -15%.

You (probably) shouldn't track an index yourself; that would (probably) take too much effort and/or money. And you (probably) shouldn't pick individual investments; you (probably) won't beat the market due to your silly human biases.

According to my quant friend, assuming an efficient enough market and an optimal enough allocation, index funds can have a higher risk-adjusted return¹ than any individual investment. Holding risk-adjusted return roughly constant, you can still trade off for higher or lower risk/return. Generally, people consider stock index funds higher risk/return and bond index funds lower risk/return.