[raphaelrk]

I don't have much experience in the market, but "invest in index funds" seems like a way to inflate the values of all the companies in the index fund, deserved or not, and I find it worrying that it's touted as an easy/simple way to make money. If there's a lot more index fund money than hedge fund / active money it would probably mess with prices, right? Is there any good analysis of when it would stop making sense to invest in an index fund? Or ways to weight certain companies higher or lower in a 'personal' index fund?

[thekyle]

> If there's a lot more index fund money than hedge fund / active money it would probably mess with prices, right?

No, assets under management is irrelevant to price discovery. Trading is what sets prices not holding stocks. According to a 2018 Vanguard paper index funds only made up around 5% of trading volume despite holding about 50% of assets. So active managers are still responsible for 95% of price discovery even if they hold only 50% of assets.

https://personal.vanguard.com/pdf/ISGBEL.pdf

[loganfrederick]

One key to the success of index funds is that the indexes will remove underperforming companies and replace them with growing companies. The argument for this enforced survivorship bias is that it's meant to provide a dynamic view of the economy changing. In practice, this also helps keep the returns of the indexes up and is a case of survivorship bias working out in the individual passive investor's favor.

https://jpm.pm-research.com/content/29/1/51