This month marks the 50th anniversary of the Vanguard First Index Investment Trust, now Vanguard 500, the original way for individuals to passively own the S&P 500 index. The fund had an inauspicious start. Founder Jack Bogle raised just $11 million, about a 10th what he had hoped, and it was dubbed "Bogle's Folly."

Telling people they could be average turned out to be a tough sell, even though expenses were much higher for actively managed funds. "It took a very long time to recognize that cost mattered," says Rodney Comegys, Vanguard Capital Management's chief investment officer.

Index funds went from a punchline to the investing world's 800-pound gorilla. They've been misunderstood at both extremes. The transformation from mockery to dominance reflects a fundamental shift in how investors think about markets and costs.

Today, index funds manage trillions and shape corporate governance, prompting fears about market concentration and reduced price discovery. The journey from "Bogle's Folly" to financial cornerstone illustrates how a simple idea—own the market cheaply—can upend an industry.