The index will pay you beta, which is the market return - no more, no less. If you build a portfolio where you combine an investment in the index fund with other, different investments, you can build many different portfolios which all have different risk profiles. This is useful, as people have different needs.

For example, if you're happy for your money to be locked away for a long period of time (say you're running a university endowment fund), you may be better suited to these longer term, illiquid type of in investments.

Anyone may not be who you think it is and their needs are likely different than the typical retail investor.