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I saw this on the back page of today’s Wall St Journal.
“On this day in 1971, Wells Fargo launched the world’s first stock-index fund. One mutual-fund manager’s reaction: “If people start believing this random-walk garbage and switch to index funds, a lot of $80,000-ayear portfolio managers and analysts will be replaced by $16,000-a-year computer clerks. It just can’t happen.”
Harold, this is a great piece of history. I was confused at first because I wrote something similar a few months ago that said that Vanguard created the first index fund. Checking just now, it seems that Wells Fargo created the first Institutional Fund for their pension clients, and Vanguard created the first Retail Fund for average investors. Both noteworthy events. Thanks for sharing this.
Mark Higgins in his 2024 book “Investing in U.S. Financial History” wrote the following about the development of mutual index funds –
By 1963, (Benjamin) Graham concluded (in “The Future of Financial Analysis”) that .. he (Graham) just knew with mathematical certainty that beating market averages was no longer a worthy endeavor for most analysts… More than a decade passed before several courageous innovators embraced Ben Graham’s warning by creating funds that replicated indexes…These included people like Rex Sinquefield, Eugene Fama, and William Sharpe…In 1975, Jack Bogle commercialized the concept for the mass market when his firm, the Vanguard Group, introduced its first indexed mutual fund on December 31, 1975.
Going a bit further back it should be noted that John Bogle’s 1951 Princeton senior thesis was about the mutual fund industry. Graham taught investment and security analysis from 1928 to 1956 at Columbia University. Warren Buffett was a student of Benjamin Graham at Columbia University in the early 1950s.
Hmm. Hardly something I would expect a fiduciary to say publicly, although I can certainly imagine they felt that way. By the way, using CPI that salary in 2026 dollars is about $659 000.
Harold, I love this! Still, even though index investing has made picking funds easier, financial service professionals are alive and well. One reason is that most people remain intimidated by the idea of doing their own investing, another is that financial planning involves much more than just choosing investments, and finally, many people need someone to talk them off the ledge when markets go south.
You made a valid point Dan. While I have not used one yet, it is possible I may need to do so at some point as I get older. And if my wife should survive me, she will definitely hire one.