In August 1976, a new fund opened with an odd sales pitch. It would not try to beat the stock market. It would simply own the whole thing. Jack Bogle raised $11 million for it, about a tenth of what he had hoped.
Wall Street laughed. The fund picked up a nickname: “Bogle's Folly.” Nobody is laughing now.
Why average was a hard sell
Telling people they could be average is a terrible pitch. It sounds like giving up before you start.
The math said otherwise, and Bogle had done it. In seven of the prior 11 years, owning the S&P 500 with no fees would have beaten half of all active managers. Over the full decade from 1964 to 1974, it would have beaten 78% of them.
The reason was not genius. It was subtraction.
Here is the arithmetic, spelled out in a guest column in the May 16 Journal. Suppose an active fund charges 0.75% to 1% a year and pays another 1% or so in trading costs. It has to beat the market by roughly two percentage points before costs just to tie it after costs.
If stocks return 10% a year, that fund needs to earn 12% to break even against a cheap index. It has to be 20% better than the market just to match the market.
The scoreboard
Fifty years of results are in, and they are lopsided.
In the past 15 years, only 10% of U.S. mutual-fund managers measured against the S&P 500 have beaten it, according to S&P Global. That is one manager in ten, over fifteen years.
Costs collapsed along the way. Vanguard has cut fees more than 2,000 times since it opened, taking its average firmwide management fee from 0.68% to 0.06%. Eric Balchunas, who wrote a history of Bogle, estimates the savings to investors at more than $500 billion.
| What it costs to own the market | Annual fee |
|---|---|
| Vanguard firmwide average, at the start | 0.68% |
| Vanguard firmwide average, latest | 0.06% |
| Vanguard S&P 500 fund (May 5, 2026) | 0.03% |
| Active ETF, asset-weighted average | about 0.4% |
| Active mutual fund, asset-weighted average | about 0.6% |
Rodney Comegys, chief investment officer at Vanguard Capital Management, gave the honest version of how long this took. “It took a very long time to recognize that cost mattered.”
The new worry, and the old lesson
The criticism has flipped. People once said index funds were foolish. Some now say they are too big.
The concern runs like this. Retirement money flows into target-date funds on autopilot, and those funds buy stocks without looking at the price. They buy by index weight and nothing else. A manager can either mirror the index and become irrelevant, or own the smaller names that the flood of savings is not lifting.
Comegys calls that nonsense. If the flows really distort prices, he argues, that leaves more opportunity for somebody to exploit, not less. There are more indexes in the world than there are stocks.
Burton Malkiel made the original case less politely. A blindfolded monkey throwing darts at the stock listings, he wrote, could pick a portfolio that did about as well as the experts picked theirs.
Meanwhile, money is drifting back toward active management. A record 1,100 new ETFs launched in 2025, and more than eight in ten of them were active. Active funds took 32% of the $1.4 trillion that went into U.S. ETFs that year, up from 9% in 2021.
That is not a scandal. Some of those funds will be good. But the fee gap is real, and it compounds quietly for decades.
The lesson from fifty years is smaller than people make it. It is not that one particular index is magic. It is that expenses are certain and returns are not.
For a saver, the practical version is boring. Own the market cheaply at the core. Then spend your energy on the decisions that actually move the needle: how much you save, how you split stocks and bonds, and what you pay to hold it.
Pay less, keep more. That was the whole trick, and it still works.