But you do own upside---of the collateral.
If I own the collateral, I own the upside and downside of the collateral. If I own a stablecoin pegged to the collateral, I own the upside and downside of the collateral, plus the risk of the stablecoin collapsing.
The stablecoin doesn't offer me any upside compensating for the risk, so we are left arguing that the risk of collapse is negligible, or arguing that there is some other benefit of owning the stablecoin to compensate for the additional risk of owning stablecoins instead of owning the collateral.
I said above:
> we are left arguing that the risk of collapse is negligible, or arguing that there is some other benefit of owning the stablecoin to compensate for the additional risk of owning stablecoins instead of owning the collateral
In the case of an index fund, the typical purchaser is motivated by both a belief that the risk is negligible based on the reputation and track record of the fund manager, plus the "other benefit" of the convenience of investing in a single mutual fund rather than trying to purchase the same basket of stocks at small scale.
I agree that an automated stablecoin might offer sufficient convenience to be attractive to some investors, provided they consider the risk of collapse to be negligible.
Stablecoins are not meant to be an investment; they're for leverage. I agree it is probably a terrible idea to borrow a bunch of stablecoins and then just sit on them.
[1] Depending on the stablecoin's dependencies you might want to have converted it to dollars outside their platform first.