In 1976, "Rocky" was the sleeper movie hit of the year, America celebrated its bicentennial, and Vanguard launched the first index fund. The last event may not have made a huge impression at the moment-in fact Vanguard's First Index Investment Trust was met with ridicule-but it ultimately sparked a financial revolution that has made investors billions of dollars.

The First Index Investment Trust, which later became the Vanguard 500 Index Fund, came to life a year after John Bogle founded Vanguard. Bogle was an advocate for low cost and long-term passive investing. The Vanguard 500 Index Fund offers exposure to 500 of the largest U.S. companies and has expense ratios of 0.14% and 0.04%, for its investor and admiral share classes. Vanguard's S&P 500 ETF $(VOO)$ boasts an even cheaper expense ratio at 0.03%.

Index funds were novel back then, but they are how many investors invest today-as of 2024, there are more assets in passive funds than actively managed ones, according to Morningstar.

Back in 1976, investors were striving to beat the market, not match it. And they were willing to pay for active management in the form of hefty fund fees. That didn't make sense to Bogle who argued, instead of looking for the proverbial needle in the haystack, investors should just buy the whole haystack-and at a minimal cost. That argument initially fell on mostly deaf ears.

The First Index Investment Trust (aka Vanguard 500 Index Fund) raised just $11.3 million at its launch. That was a far cry from its $150 million target, earning it the derisive nickname "Bogle's Folly."

The real mistake, as it turned out, was not investing in that fund-and staying the course through the market's ups and downs. A $10,000 investment in the Vanguard 500 Index Fund at its launch in 1976 would have grown to more than $2.4 million by July 31, 2026, according to Vanguard's calculations.

Vanguard effect. The indexing revolution has resulted in much lower fund fees across the entire industry because Vanguard's low-cost approach has pressured competitors to follow suit. The company estimates that since 2000, index investing has helped investors collectively save approximately $570 billion in expenses. Author and Bloomberg Intelligence ETF analyst Eric Balchunas estimated in a 2016 article that Vanguard had saved investors at least $1 trillion in fees, trading costs, and other expenses.

Research company Morningstar says that the average expense ratio paid by fund investors in 2025 was less than half of what it had been two decades prior. Between 2006 and 2025, these costs fell from 0.8% to just 0.32%, according to Morningstar.

Passive index investing hasn't just triumphed over active management because of lower costs; it's also hard for active portfolio managers to consistently beat the index over time. A recent Morningstar report found that just 25% of active strategies survived and beat their passive counterparts over the 10 years through June 2026.

"Few innovations have done more to expand access and help investors build wealth over time," says Greg Davis, president and chief investment officer of Vanguard. "The fundamental promise of indexing remains unchanged: broad diversification, low costs, and the power of staying invested for the long term."

Vanguard's First Index Investment Trust set a template for other companies to follow. BlackRock, Charles Schwab, Fidelity Investments, and other financial services companies offer their own index funds. Indexing also came to bonds. Vanguard's second index fund, Total Bond Market Index, launched in 1986.

The entire indexing revolution might not have happened but for some unusual circumstances. To keep it simple, Bogle was fired in 1974 from his job as CEO of an asset manager and he then went on to found Vanguard the following year as a private company that is owned by its fund shareholders. Today, it's one of the heavyweights of the asset management industry with more than $13 trillion.

The company says that to celebrate a milestone in both Vanguard and investing history, an original stock certificate from the launch of First Index Investment Trust in 1976 will be on display later this fall at the Museum of American Finance at its new location in Boston.