Index funds, advertised as low-fee options, are popular investment vehicles for long-term investors. They track market indices such as the S&P 500, making them an attractive option for diversified equity exposure. However, during down markets, these funds reveal certain drawbacks that investors should consider. No Downside Protection Because there is no focus on the quality of holdings, index funds offer no protection against falling markets. Since they are passively managed, they don’t adapt to market conditions or reduce exposure to declining sectors. This lack of consideration for quality can leave investors vulnerable to steep losses, especially during prolonged bear markets or recessions. Delistings, or the removal of stocks from an index, can have a considerable impact on index performance. A company can be delisted from an index for several reasons, such as a merger, acquisition, bankruptcy, or failure to meet listing requirements. When a shrinking company falls below the requirements it is removed from the index, but the value lost before delisting is permanent. Enron’s delisting in 2001 is good example of why only considering a company’s size can be perilous. Once a darling of