Small investors should absolutely be investing in index funds and not individual small-cap stocks. However, the returns of those index funds are driven by the r

Small investors should absolutely be investing in index funds and not individual small-cap stocks. However, the returns of those index funds are driven by the returns of the index's constituent companies. When the most lucrative companies remain private, index funds can't invest in them, and that hurts all index investors. Not to mention that even if the companies aren't any more lucrative, they can still help the average investor reduce their portfolio risk via diversification. If the universe of public stocks shrinks, your portfolio is going to face greater volatility, even if your absolute returns remain constant. Diversification is the only free lunch out there.