Does this exist, though? If you presume some % of America is putting their paycheck into indexes via Vanguard, Betterment, and some other % is selling due to being retired or whatnot, then this isn't an equilibrium.

There's maybe some room for redeeming index value and "caching" that demand from within Vanguard, etc, but I tend to doubt this action wouldn't hit the market at all.

It can lead to pricing inefficiencies with shares inside vs outside the index. And those should be kept in check by non-indexing value investors.

Did you mean to reply to my post? I don't see the relevance.

An index passively holding 99% of the market would not interfere with price discovery because the remaining 1% would go about its business as if nothing was different. Indexes can't sustain irrational prices because they have no impact on prices.

A single entity holding 99% of anything will absolutely have an impact on liquidity which absolutely impacts price discovery.

> An index passively holding 99% of the market would not interfere with price discovery because the remaining 1% would go about its business as if nothing was different.

That may be true at the point in time where it's already at 99%, but consider the impact on prices as funds were poured into it over time on the way to 99%..

If the funds put in to the index were taken out of mutual funds, there might not be any impact on the prices at all.