[laminarflow]

I agree with your views, but anecdotally, my worry is about how many of those Mom and Pop investors bought the index funds specifically because the index funds have recently performed well; and of that faction, how much of the capital allocated to index funds was pulled from other sources, causing those sources to fall in value?

The data would also support that on a dollar-weighted basis, most index fund investors are not really buying-and-holding:

"Turnover rates for two of the most popular ETFs are higher than 3500%(!), an average holding period of about a week. That is dozens of times greater than the trading liquidity of even its most liquid constituents"

http://www.grantspub.com/files/presentations/Grant's%20Confe...