The premise of RWDWS is flawed by assuming that the secondary market in stocks is 'free'. This book was published in 1973, and after the 'analytic' schemes of the 1960s (and continuing in the 70s), it had obvious appeal. What it did not account for was government manipulation of financial markets through (de)regulation. For example, the Monetary Control Act of 1980 and the expansion of IRA coverage under ERTA in 1981 opened the flood gates to the securities markets and intensified the Ponzi-scheme nature of securities 'investing'. Prior to the publishing of RWDWS, it is reasonable to claim that the stock market was a arena for transferring risk, not pretending to be a savings institution. Something else to bear in mind is that there are little or no real alternatives to 'funds', and this exaggerates the influx of capital into them. The idealized view of stock and bond trading fails to fully account for the transaction costs, which are largely hidden, and this 'vigorish' makes it a losing game eventually. The costs associated with funds ('index' or otherwise) are also carefully and skillfully masked, but it is easier to market the diversification arguments. There's a reason that the 'financial industry' is so profitable: http://chartingtheeconomy.com/?p=665 It's an increasingly elaborate wealth transfer mechanism.