My line of thought is this: inflation is ~3% a year (hasn't been that high in a while, but just wait), and market returns average 5% (aka beta) a year with some

My line of thought is this: inflation is ~3% a year (hasn't been that high in a while, but just wait), and market returns average 5% (aka beta) a year with some level of volatility. By definition, the alpha of an index fund is zero minus fees. I'm willing to trade a guaranteed-small negative alpha for the reduction in volatility in alpha that I would have across a portfolio across years. I've still got overall market volatility to contend with, but my time horizon is long so that gets pushed to the side. Index funds are a perfect choice for retail investors like yourself. But retail investors are a small percentage of the market; institutional investors make up the bulk of the transaction volume that provides liquidity for the rest of the market. Because they trade stocks millions of times a day, you're never going to beat them at the stock picking game. But their activity does push prices up across the board -- because the assets the institutional investors are trading are the basis of the index funds the retail investors are buying. So there's not really a bubble in an asset class if retail investors move to index funds, because the retail investor is buying a little bit of everything. If anything, there is a bubble on certain stocks that consumers are familiar with (i.e. AAPL, AMZN, GOOG, FB, etc.) But by buying the index, you're buying both the stocks that are overvalued and the ones that are undervalued. Now, certain index funds may eventually become out of whack with respect to overall market return: the S&P500 is generally considered to model the overall economy well, but that might not always be the case. That's fine, if you feel one index is becoming overvalued, weight your portfolio into another index. Or if you feel equity in general is overvalued, shift your portfolio into T-bills. And yeah, for me, the decrease in anxiety is totally worth it. The economy is either doing well, or it's not, but in either case my money is along for the ride.