> Are there any index funds that track the entire market? Wouldn’t investing in all companies solve the problem of index tracking?

Yes, there are funds that try to match the entire market. Vanguard runs a couple "total market" indices (VT and VTI, for example), and there are more.

But that's not to say that they actually invest in the entire market. They don't; they use sampling to try to match the performance of the thing they index. (Vanguard, at least, gets very very close to this...)

Disclosure: I am invested in in VTI.

Yes, it's called a Total Stock Market Index Fund, and they are quite popular. There's really no reason to invest in the S&P500 anymore.

That makes sense. I am surprised why anyone would want to choose S&P500 in this case.

Because most of us don't live in the United States.

Good luck finding a total market index fund elsewhere.