From his research for his undergraduate thesis at Princeton, Bogle knew that most mutual fund managers underperform the market. And the overwhelmingly majority of the few professional money managers who did beat the market in any particular year struggled to repeat their success. Transaction and management fees ate into investors' returns even further. Long term, Bogle reasoned, investors would be better served by buying and holding a low-cost, diversified portfolio of stocks mimicking the broader market. Such a fund eliminated the need for high-priced stock pickers and heavy portfolio turnover, and it would beat an actively managed one on an after-cost basis.
On the last day of 1975, Vanguard launched the First Index Investment Trust, which tracked the S&P 500. Later renamed the Vanguard 500 Index Fund, it started with meager assets of $11 million, a fraction of the $50 million to $150 million Bogle had hoped for—and not even enough to buy every stock in the index. But the trek through the wilderness had begun.
Vanguard eventually emerged as the world's second-largest mutual fund company. The Vanguard 500 Index Fund hit the milestone of $100 billion in assets in 1999 and overtook the actively managed Magellan Fund as the world's largest mutual fund the following year. In 2011, it crossed the $200 billion in assets mark. By then, there were 383 index funds in the U.S., managing total assets of $1.1 trillion. Bogle had moved beyond tracking the S&P 500 and into a raft of funds mimicking domestic and international indexes, and to bonds and equities.