[!todo] Seed note. A starting point, not a finished note yet.
An index fund holds the securities in a published index in their index weights, so its return tracks the index minus a small fee rather than relying on a manager’s stock picks. The case for it is cost and the empirical difficulty of beating the market after fees: Bogle’s argument was that the average active dollar must underperform the market by its costs. The structural critique is that index funds outsource price discovery to whoever is still trading actively, and at scale their flows can move prices on their own. The mechanics and risks of one specific index are worked out in S&P 500, and the diversification limits are in Systematic and Idiosyncratic Risk. Seeded from S&P 500.