> When people bid up the price of TSLA or GME to stratospheric valuations, the index fund must re-adjust their market-weighted holdings to reflect those prices,

> When people bid up the price of TSLA or GME to stratospheric valuations, the index fund must re-adjust their market-weighted holdings to reflect those prices, creating further money inflows to the asset and thus a self-fulfilling prophecy. This claim doesn't apply to the majority of index funds. It's specific to S&P500 funds, which because of their artificial limit of 500 stocks, have stocks enter and exit based on valuation. More modern index fund designs (like Vanguard Total Market) hold a fixed percentage of every public company no matter how small. So they rode TSLA, GME and AMC up and down without lifting a finger. These modern funds only transact due to inflows and outflows, or when stock is newly issued or bought back. Even specific to S&P500, another quirk of that index's legacy design is that it "must" do nothing in particular. It has an index inclusion committee taking into account factors such as profits, and with the discretion to delay inclusion even after its formal criteria are met. The investing nihilists love to make arguments that ordinary investors will be "forced" to reward them by some reflexivity. But the reflexive effects they point to are all quite weak. So far, the vast majority of the rewards to nihilists have come by persuading other investors to turn nihilist, not by somehow exploiting mainstream investing strategies.