It took the 2008 market crash to bring that message home for many Americans.
Vanguard Group, the dominant index-fund company, has been the standout winner of fund companies since the crash. The firm's total stock and bond fund assets have rocketed to $2 trillion from $1.1 trillion at the end of 2007.
In the first eight months of this year the company took in $51 billion in net new cash to its conventional stock and bond funds, according to Morningstar Inc. That trounced the competition: The next-biggest gainer was JPMorgan Chase, with $15.6 billion in net inflows.
Vanguard also has been a leader in offering exchange-traded funds, or ETFs, which are designed to replicate broad or narrow market indexes, with minimal management fees. ETF industry assets have soared since 2007 to $1.5 trillion.
Investors' rush toward index funds stems from "the perceived failure of active management," said John Rekenthaler, vice president of research at Morningstar in Chicago. Rightly or wrongly, investors may have expected their actively managed funds to protect them from the 2008-09 market collapse, he said.
"They're now saying, 'I'm not going down that road again,'" Rekenthaler said.
Shifting to index investing essentially is deciding that if you can't beat 'em, join 'em: Just own the entire market, and for a lot cheaper than a stock-picking fund manager would charge you.
LOSER: Stock exchanges. For the last 10 years or more the media have written reams about the end of the traditional stock broker.
And going with them, now, are the stock exchanges.
U.S. stock trading volume has shrunk dramatically since 2008, in part as many small investors have abandoned equities. That has accelerated the pace of mergers in the trading business, as exchanges partner up with stronger players or consolidate to grab more share of a disappearing market.
NYSE Euronext, parent of the once-iconic New York Stock Exchange, is selling out to commodities trader IntercontinentalExchange. And two large electronic stock trading networks, Bats Global Markets and Direct Edge Holdings, announced merger plans last month.
As trading systems have become ever faster and more complicated, they've also been victimized by their own technology. Some high-profile snafus in recent years — including the "flash crash" in 2010 and Nasdaq's sudden shutdown last month — have further soured average investors on stocks.
Bianco of Bianco Research believes the exchanges made a crucial mistake years ago by courting high-frequency traders, or HFTs, which many individual investors see as villains in the market. Now, even high-speed trading volume is declining.
"The exchanges look at it and say, 'If we get rid of the HFT guys, we got nobody,'" Bianco said.