Comment by nostrademons

If people actually dumped index funds for cash en masse it would be catastrophic. To attach some numbers, MSFT averages about 35M shares in daily volume, and that includes all the market makers, HFTs, etc. BlackRock (iShares) owns 593M shares of MSFT and Vanguard owns another 482M. Together, the amount of shares that index funds own is about a month and a half of total trading volumes. I'd bet that such a crash would unfold over about 2-3 days, which brings up the specter of stocks literally going "no bid", where there are not enough buyers for every seller to sell, at any price.

Likely the government would step in and inject cash directly into the markets to support them in such a scenario, because a broad-index stock market crash is the modern-day bank run. Retirees carry the bulk of their savings in the form of stocks; if it disappears, we'd likely face revolt.