when Bogle first introduced the S&P500 I believe underwriters had hoped to raise $150 million.Passive funds and active funds are two completely different things. With an active fund, we depend on management to decide what to invest in. With a passive fund, we tell the management what to invest in. What prevents a passive fund management from acting like an active fund management for a portion of the fund?
They only raised $11 million.
It was considered a flop and was referred to as "Bogle's Folly".
the underwriters (or maybe the board, can't remember) said to Bogle they needed to give investors their money back and Bogle said we'll do no such thing. Investors gave the money to start the first index fund (for retail investors) and that's what he was going to do. He didn't have enough money to buy all 500 stocks in the index so he bought as many as he could in hopes of getting as close to the market as possible. As more money came in over time, tracking error got less and less.
I'm telling you this as an example of we don't tell management what to invest in. They invest in a way that's going to get as close to the index/benchmark as possible. People have often said while there are close to 4000 companies in total market index fund, if you look at the smallest companies they're so small they could be removed from the index and wouldn't change the performance of the fund. They're in there to be as representative as possible and folks like having more stocks rather than less because we intuitively don't want to put all our eggs in just one basket. Also, it's always possible the smallest company may one day be the biggest. We don't want to miss owning that if it does. Cue Bessembinder.
In answer to your larger question, the funds are audited and there are compliance officers and so on to make sure the funds and managers are complying with the regulations. I don't know why you'd worry about it or even how you can. Read the annual and semiannual reports to see what the fund holds, what percentages and so on.
Statistics: Posted by arcticpineapplecorp. — Tue Feb 17, 2026 4:29 pm — Replies 9 — Views 341