Wall Street called it "Bogle's Folly" and then it took over the industry
In August 1976, Jack Bogle launched the world's first index fund. Underwriters tried to raise $150 million. They got $11.3 million. He launched it anyway.
The idea behind index investing was simple enough for a Princeton senior thesis: if active fund managers as a group must match the market before costs, and costs are substantial, then most active funds must underperform the market after costs. The math was unarguable.
John Bogle had been circling this logic since his 1951 thesis and was galvanized by a 1974 article by Nobel laureate Paul Samuelson demanding that someone, somewhere create a no-load, no-management-fee fund tracking the S&P 500.
Bogle, newly heading The Vanguard Group, did exactly that. The First Index Investment Trust launched on August 31, 1976. Wall Street brokers tried to raise $150 million from investors in the IPO. They raised $11.3 million — a 93 percent shortfall. When underwriters suggested canceling the deal, Bogle refused. "Don't you realize that we now have the world's first index fund?" he told them.
The fund — later renamed the Vanguard 500 Index Fund — was derisively called "Bogle's Folly" by competitors who insisted that settling for the market's return was un-American. By the time Bogle died in 2019, index funds held more than $11 trillion in assets. Samuelson eventually ranked the invention alongside the wheel and the alphabet.