, Columnist
How Index Funds Prevailed
The notion of eliminating the role of the middleman was not popular with money managers.
Vanguard's John Bogle once dismissed the idea.
Photographer: Scott Eells/BloombergThis article is for subscribers only.
Forty years ago last week, Vanguard’s John Bogle created the first index mutual fund, offering investors a guarantee: They would never outperform the market, but nor would they underperform it. The Index Investment Trust (now the Vanguard 500 Index Fund) simply tracked the performance of the S&P 500.
Index funds are now a huge business, accounting for trillions of dollars of mutual fund money. And with good reason: Even though their returns are utterly average, their minimal fees bring big savings for investors, allowing them to outperform actively managed funds over the long term.