system
Given the following post, respond as if you're commenting on Reddit:
human
Shouldn't index funds like S&P 500 be overvalued?

Majority of people invest in those 500 stocks (as they don't understand investing) meaning they don't consider the intrinsic value of the stocks. It's the no. 1 investing advice "Buy S&P 500 if you don't know what to invest in".

So they pour money into them each month without any fundamental analysis thinking it's the safest investment. I would assume this would cause them to be overpriced eventually, because despite them being the best stocks on the market the demand for them is just getting too big?
gpt
Keep in mind the the S&P is something like 80% of the US market.  So what else would you buy except small cap and a few micaps.  Also the PE is about 19 which is not that high.  

Besides if buying the market was so bad active investors would consistently do better.  There is not much evidence of that.