Dr. L Brody, you are mistaken regarding the S&P index. It is comprised of the 500 largest companies by market value. Companies do not fall off the list because simply because someone decides to take a loser off and add a winner - it happens automatically.
As far as Kodak, Polaroid and others "taken out" of the index - they fell off the index because their value fell so much.
What should frighten you today is that because the S&P 500 index is a weighted index with the more valuable (again, based on market cap) contributing more, Apple, Microsoft, Facebook, Amazon, and Google account for about 13% of it.
"Betting" on the index is a fools game, because it employs absolutely no analysis - the index fund will mindlessly buy and sell the index component shares across the board no matter what the fundamentals or performance of the company looks like. The operate on nothing more than money flow in and out. Because so many "investors" have now accepted this foolish approach, it's like an upward spiral...the more the index goes up, the more people are pouring money in, the fund buys shares, the index goes up...lather rinse repeat.
Unfortunately, this only works so long as money inflow continues. It is the greater fool approach at work. As the index goes higher, it is enticing more folks to put money in. However, as more folks are putting money in, everything is becoming more overvalued. When the music stops playing, investor sentiment changes, and we see money outflow, the index fund works just as well going down. Unless you believe that Apple, Microsoft, Facebook, Amazon, and Google are going to go up forever the index funds will be retreating the moment we have a correction in the technology sector.
What most folks who are actually investors and have been around the markets for more than the past decade also know, is that when technology stocks go into a slump, it routinely goes on for years and is very brutal when it comes.
Long story short - most folks mindlessly throwing their money into index funds really have no idea of what they're doing, the risks involved, or how quickly their investments can be cut in half.