If most people blindly invest in index funds the whole market ends up overvalued. And they kill competition as companies only aim to just stay in the index. It

If most people blindly invest in index funds the whole market ends up overvalued. And they kill competition as companies only aim to just stay in the index. It should be adjusted by current and expected returns. Else, it becomes an asset bubble with insane multipliers of real returns (like today). You are just counting on someone else to buy the stocks when you sell in the future.