Comment by Dig1t

They only go into the index if they are actually worth enough to go into the index. If they drop below a certain value they will naturally be kicked out of the index just like any other company. I.e. if they are not actually in the top 500 US companies then they will not be in the 500 index. The risk of any one company is balanced by all the other companies in the index also.

If they really are a scam, their value will drop and they will be kicked out of the index. I still don’t understand how this means people will be “holding the bag”.

Additionally if you really believe that they are a scam and their price will fall you can just short the stock to completely neutralize their effect on your 401k.