Are index funds a pyramid scheme?
When VTSAX admiral shares were lowered from $10,000 to $3,000 it triggered the pyramid scheme part of my brain.
Don’t get me wrong. I’m a believer in VTSAX and index funds in general and I won’t be moving my money anywhere else. Set it and forget it and beat the rest of the market by forgetting about your investment. Low fees, no investors trading in and out of stocks, blah blah blah. But seriously, what happens when everyone gets into index funds? If indexing the market is the way to win in your 401k portfolio, what happens when we all put our retirement funds into low cost index funds and walk away?
What fools do we make our money from if nobody else is trading in and out of stocks? It feels like the way the future makes money from indexing would be getting more people to invest in your fund to prop up the value of the index fund, which is no longer operating on the fundamentals of the underlying businesses. Remember, the stock market is suppose to be the place normal folks purchase a portion of a company. That’s why it’s investing and not speculating. The underlying businesses are suppose to be worth owning.