Index Funds May Work a Little Too Well
A bigger problem with index funds is the inherent bias they create towards consolidation of capital at the top.  A company that becomes part of the S&P 500 will automatically have bi-weekly buyers of their shares as people pump money into index funds via payroll deduction.  Nearly every piece of mainstream financial advice in the US suggests such behavior... "d% of mutual funds fail outperform the S&P 500" etc.  Of course such comparison ignores transaction costs, administrative costs, risk, diversification across asset classes, et al.  However, it leads to many people who want to "Set it and forget it" to just buy the S&P 500 index companies automatically every 2 weeks, pumping up the values of large cap corporations whether they perform well or not.<p>I know that companies don't necessarily benefit directly from an increasing stock price, but in reality it allows them to raise capital by issuing new shares with less dilution.  Also it makes it costlier for smaller competitors to raise capital, crowding out competition.  At the end of the day, the "antitrust" question is not about Apple v. Microsoft... it is moving more in the direction of "Apple & Microsoft" vs. anyone trying to claw and scrape their way into the game.