The Fund Wall Street Called a Folly Turns 50

The first index fund offered to everyday investors just turned 50 but how has the world of investing changed since it first launched? Antonia Medlicott shares more.

I always read the comments under my articles. Some are kind, some are cross, and every so often one sends me down a rabbit hole. That’s what happened last week, when a Times reader pointed out that the first index fund for ordinary investors had just turned 50.

I checked, and they were right. The story behind it is one I think every saver should know.

On 31 August 1976, an American called John Bogle launched a fund that was unpopular from the start. He’d hoped to raise $150 million but instead raised a meagre $11.3 million, which was not even enough to buy all 500 companies the fund was meant to own. Rivals nicknamed it “Bogle’s Folly”. Some called it un-American. Who, after all, sets out to be merely average?

Fifty years on, Vanguard estimates that $10,000 put into that fund in 1976 would be worth around $2 million today. In the US, index funds that invest in shares now hold more than $18 trillion, well ahead of the roughly $12 trillion in share funds run by professional stock pickers. The folly won.

Don’t pick the apples, buy the orchard

An index is just a list. The FTSE 100 is the 100 biggest companies on the London Stock Exchange. The S&P 500 is 500 of America’s biggest firms.
An index fund, usually called a tracker here, simply buys everything on the list.

An actively managed fund, by contrast, pays a professional to choose which shares to buy and sell, hoping to beat the market. The way I think of it: an active manager spends their days hunting for the ripest apples. A tracker just buys the orchard.

Why average wins

The logic Bogle championed is simple. Think of the whole stock market as one enormous pie that is shared between all investors. If the pie grows by 10%, then investors as a group have earned 10%. Some will have a bigger slice because they picked winning investments, while others will have smaller slices because they picked poorly.

But collectively, they can’t get more than the total the pie has grown.

What does make a difference is how much of their slice they have to hand over in fees.

Fees sound like small beer. Fidelity says active funds typically charge around 0.75% a year, while trackers can cost less than 0.10%. But put £200 a month away for 30 years, growing at 6% a year before fees, and the cheaper fund leaves you with about £192,000. The pricier one leaves you with about £171,000.

That’s more than £21,000 handed over for the privilege of someone trying to beat the market. And most don’t manage it.

In 2025, 90% of actively managed UK share funds failed to beat their benchmark, according to S&P Dow Jones Indices. Over the ten years to the end of 2025, 93% of UK share funds fell short, and so did 95% of US share funds sold in sterling. When I first saw those numbers side by side, I felt cross on behalf of everyone who’d been sold the opposite story and paid for it.

Why I’d back them today

This is my opinion rather than advice, but I think index funds are one of the best things ever to happen to ordinary savers.

They’re cheap, and every pound you don’t pay in fees keeps growing. A single global tracker can own thousands of companies in dozens of countries, so one collapse is a dent rather than a disaster. And they take the guesswork away.

Today everyone wants to know which AI companies will win. Nobody can reliably tell you the answer. With a tracker, if the winners are in the index, you own them.

They fit neatly inside a stocks and shares Isa, where growth is free of UK tax, or a pension. And they protect you from your worst instincts: the urge to sell in a panic or chase last year’s hot fund.

This isn’t only for 25-year-olds, either. If you’re already drawing your pension and have money you won’t touch for a while, the same logic on costs and spreading risk applies.

The catch

Trackers aren’t risk-free. They follow the market down as well as up, as anyone holding one in 2008 or early 2020 will remember.

Money you might need in the next few years is usually better kept out of the stock market.

Global trackers are also weighted by company size, so a lot of your money ends up in the US and a handful of giant tech firms.

And check what you’re paying: a cheap fund on an expensive investment platform can still cost more than it should.

The hardest part is your ego

Index investing asks you to accept being average, which can feel like giving up when a friend is crowing about the one share that tripled.

But fifty years of evidence says average, done cheaply and left alone, beats most of the professionals trying to be clever.

Bogle’s Folly turned out to be one of the smartest ideas in modern finance. So thank you to the reader who reminded me. I told you I read the comments.