Two More Strikes Against Mutual Funds

The first time I interviewed John Bogle, founder of the Vanguard Group, 15 years ago, he fretted about how the low-cost fund he'd introduced to mimic the S&P 500 index had failed to catch on.

Today, that fund, (VFINX Quote)Vanguard 500 Index, has $105 billion in assets, and Vanguard reigns as the king of indexing. Although other fund companies have tried to jump on the indexing bandwagon over the years, their products cost too much and lack finesse.

That has changed over the past year as the 36 exchange-traded index funds on the American Stock Exchange have attracted a good deal of investor attention and dollars -- so much so that I gave Bogle a call a couple of months ago to ask if he worried that these newcomers might eclipse the Vanguard mutual funds. ...