Note that I said "people invest in markets", and not index funds above. There is a subtle differences, modern index funds are not true market indexes. There are fund managers who trade actively - however they trade mush less often than a traditional actively managed funds and with different rules. The managers do watch earnings reports and sell bad stocks, but the managers are also in for the long term and re willing to wait out a downturn. The managers also know they are judged by the index, and so bad stocks are not a negative in the same way that active funds are judged. Thus an index fund trades much less often, but they are not really a buy the index as published.
