Mark Blaze
A Historic Milestone
Vanguard's Total Stock Market ETF (VTI) has become the first index fund to reach $1 trillion in assets under management, cementing passive investing as the dominant strategy for both retail and institutional investors. The milestone represents a remarkable journey from Vanguard founder Jack Bogle's controversial launch of the first index fund in 1976 with just $11 million. VTI now holds stakes in every publicly traded U.S. company, from Apple and Microsoft to the smallest micro-cap stocks, giving investors exposure to the entire U.S. equity market for an expense ratio of just 0.03%. This milestone comes as the passive investing revolution accelerates and investors seek diversified market exposure.
The fund's growth has accelerated dramatically in recent years, with $200 billion flowing in during 2025 alone as investors flee expensive active management. VTI's rock-bottom fees — charging just $30 per $100,000 invested annually — have saved investors billions compared to actively managed funds. The fund's 15-year annualized return of 12.8% has consistently outperformed 85% of actively managed large-cap funds, validating Bogle's prediction that "costs matter" more than manager skill over the long term. Income-focused investors are also exploring passive investing strategies alongside index investing.
The Passive Revolution
VTI's milestone reflects a broader shift in investing philosophy. Passive index funds and ETFs now control $15 trillion in assets — 52% of all U.S. equity fund assets — up from just 15% in 2010. This migration has forced active fund managers to lower fees dramatically or face extinction. The average equity mutual fund expense ratio has dropped from 1.2% in 2000 to 0.47% today, saving investors an estimated $50 billion annually. Vanguard alone manages $12 trillion, making it the world's largest asset manager and a force that moves markets simply through its index fund purchases.
Market Implications
The rise of index investing has fundamentally changed market dynamics. As trillions flow into market-cap-weighted funds like VTI, larger companies receive proportionally more investment regardless of fundamentals — a phenomenon critics call "indexing distortion." However, proponents argue that passive investing provides better diversification, lower costs, and superior long-term returns for most investors. VTI's achievement proves that Bogle's vision of democratizing access to the entire stock market has succeeded beyond even his wildest dreams, transforming how millions of Americans build wealth through low-cost, diversified investing. This contrasts with active portfolio management strategies highlighting different investment philosophies.