On Aug. 31, the first index mutual fund will celebrate its 50th birthday. On that day in 1976, an upstart fund company by the name of Vanguard run by the late John C. Bogle launched the first publicly available S&P 500 index mutual fund. A half-century later, all share classes of the fund, including the investor share class of Vanguard 500 Index VFINX, have $1.67 trillion in assets. According to the Investment Company Institute, index mutual funds and exchange-traded funds comprise 50% more assets than actively managed US stock funds.
I’ve been an indexer for 38 of those years, 22 years of which as an advisor, and things have changed dramatically for me during this time. No longer do I have to explain to people what an index fund is and why fees matter. Instead, investors now contact me to get out of expensive active funds and into index funds.
I feel fortunate to have known Bogle and to still keep in touch with his longtime executive assistant, Emily Snyder, and one of his sons, Andrew. Here’s the story of the birth of indexing and why its growth shocked even me, a longtime avid indexer. In addition, here’s what I think would have happened had Bogle not created the first index mutual fund.
A quarter century before the launch, as a young Princeton student, Bogle wrote his senior thesis stating mutual funds can make no claim to superiority over the market averages. As his career took off and he rose to chairman of Wellington Management, he put the idea of indexing on hold. In fact, in 1960, Bogle used the pen name John B. Armstrong in an article he wrote for the Financial Analysts Journal titled, “The Case for Mutual Fund Management” to defend professional active management.
In 1974, the board of Wellington Management fired Bogle as a result of an unwise merger he orchestrated. But Bogle was still chairman of the 11 Wellington mutual funds. The Wellington board voted to keep running all of the funds’ operations except for administration. The directors of the funds then set up a new administration company with Bogle as the CEO. The name of that company was Vanguard.
Rather than creating a for-profit company, Bogle and the fund directors structured the new firm to be owned by the funds themselves. Thus, the shareholders would own Vanguard. Says Bogle, “No man can serve two masters,” referring to investors and owners of the investment management company.
Bogle returned to the idea from his Princeton thesis, and on Aug. 31, 1976, he launched the First Index Investment Trust, which tracked the S&P 500 index. The fund initially had a sales load of as much as 6%. Bogle’s goal was to raise an initial $150.0 million, but the IPO only brought in $11.3 million. In fact, it didn’t have enough funds to buy all 500 stocks in the index; it could only buy 280. Bogle called it a “complete flop,” while the industry called it “Bogle’s folly” and indexing “un-American.”
How did Bogle feel after the flop? I spoke with Roger Wood, then an officer of the lead underwriter of the fund, Dean Witter. When it became apparent the amount raised would be only a small fraction of the goal, Wood says he offered to cancel the effort and reimburse Vanguard for its substantial out-of-pocket costs. Wood told me Bogle responded emphatically with something like, “Heck no. We will have the world’s first index fund, and this is the beginning of something big.”
Andrew Bogle told me that, while his dad viewed the amount raised as a flop, he viewed the IPO as a huge success in that the first index mutual fund was officially launched. Andrew Bogle also said that his dad viewed the Bogle’s folly criticism as free media coverage.
Vanguard would go on to attract trillions of dollars, but another way to define success is that a $15,000.0 investment in that first index fund at its launch is worth more than $3.6 million today, by my calculations.
Jack Bogle had created the first index mutual fund by the first fund company owned by the investors themselves. But he had one more key goal: to eliminate sales loads. About six months after the fund’s launch, the board approved Bogle’s proposal to make Vanguard one of the first no-load mutual fund companies. “My claim was that we were not violating our pledge that precluded Vanguard from engaging in distribution, but were simply eliminating distribution,” Bogle wrote.
Vanguard estimates that as of the end of 2025, indexing has saved investors about $570 billion. Bogle created so much financial freedom for people that I, along with many others, felt he deserved the Presidential Medal of Freedom, the nation’s highest civilian honor. While we weren’t successful in the effort, Bogle changed millions of lives for the better.
Would Bogle actually have created the first S&P 500 index mutual fund had he not been fired from Wellington? When I asked Andrew Bogle that question, he replied. “I think that it could probably have been more difficult to launch the index fund if he hadn’t been fired since it was such a radically different way for people to invest. But he was known to persuade and push through his ideas, especially when the math of the index fund showed how investors would benefit.”
After all, Jack Bogle’s Wellington firing allowed him to only launch an “unmanaged” fund. It’s one of those serendipities of life, Andrew Bogle said.
Would someone else have launched the first index mutual fund if it hadn’t been Jack Bogle? Sure. While not in a mutual fund wrapper, there were already a couple of other investment wrappers (such as a pension fund) based on the S&P 500 index. In late 1974, Nobel laureate Paul Samuelson urged the creation of a low-cost fund that would closely track the market. So, the idea of an index fund was gaining traction.
But this doesn’t mean investors would have benefited nearly to the degree we have over the past half century. I suspect the first index fund wouldn’t have been created by a company owned by the fund’s investors. Instead, it would have created billions of dollars for an investment management firm and its shareholders rather than fund investors. The goal would have been to maximize profits rather than relentlessly lower investment costs for investors. Bogle could have been a billionaire himself had he founded Vanguard as a for-profit firm he owned.
So, happy birthday, Vanguard S&P 500 index!
Author’s disclosure: I accepted an invitation from Vanguard to attend the New York Stock Exchange bell ringing ceremony on Aug. 31 to celebrate the 50thbirthday of the S&P 500 index mutual fund. I am paying my own way, but Vanguard will be hosting a brunch that I will attend.
The author or authors own shares in one or more securities mentioned in this article.
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