Index funds will almost always outperform actively managed funds. They are the best choice for the layman investor. An excellent book on this topic is The Little Book of Common Sense Investing by John Bogle.

https://www.amazon.com/Little-Book-Common-Sense-Investing/dp...

Stock market is not that risky in the very long term, say, 10 years or more, if done well.

And by "done well" I do not mean predicting ups and downs, but having a diversified portfolio (investing everything in one company is not a good idea, does not matter how promising or established it looks), which is doable with all the investment funds out there that ask for a very low minimum investment.

Check these books:

http://www.amazon.com/Intelligent-Investor-Definitive-Invest...

http://www.amazon.com/Little-Book-Common-Sense-Investing/dp/...

Really, there's no such thing as "optimal" because no one has a crystal ball. A portfolio of 100% VTI is indeed diverse, tax-efficient, and has low expenses. Personally, I'd add some amount of VXUS (international stocks) for further diversification and MUB (tax-free municipal bonds) for safety. You could do very well with just these three ETFs, often known as a "lazy" portfolio:

http://www.bogleheads.org/wiki/Three-fund_portfolio

Keep in mind, though, that there are no guarantees. Stocks will have bad years, and you should expect that some years they will lose 50% of their value. The key is to choose an allocation that you can live with so you don't panic and sell when things get bad. Keep contributing and rebalance regularly (once or twice a year is usually enough). Tune out all the noise and stick to your plan. Even with these dips, most people expect stocks to perform better than any other asset class in the long term (20+ years).

I'd also recommend The Little Book of Common Sense Investing:

http://www.amazon.com/dp/0470102101

It's written by John Bogle, who founded Vanguard to bring diversified, low-cost investing to the masses. Vanguard is different from other companies in that it's client-owned. The Bogleheads forum is pretty good for this kind of investment advice:

http://www.bogleheads.org/

You might also check out Wealthfront and Betterment. They are software-based financial advisors that use Modern Portfolio Theory and the Black-Litterman model to allocate your money optimally given their assumptions about expected returns and correlations between asset classes:

http://www.blacklitterman.org/intro.html

https://www.wealthfront.com/whitepapers/investment-methodolo...

https://www.betterment.com/portfolio/

As a caveat, it should be noted that John Bogle, founder of Vanguard (and the whole index investing movement, for that matter) is not a big fan of the ETFs.

Check out http://www.indexuniverse.com/sections/news/6012-bogle-invest... to see how Vanguard's ETFs performed against Vanguard's index funds (in short, not well).

I agree with Adams that index based investing is a great idea for hands off people, but do yourselves a favor and read Bogle's seminal book on index investing: http://www.amazon.com/Little-Book-Common-Sense-Investing/dp/... first.

It's very concise but it will serve you well.