Index funds boomed well beyond Vanguard. More than 360 index-based stock and bond mutual funds were available to investors as of last year, and assets in those types of funds have swelled from $27 billion in 1993 to more than $1.4 trillion as of June, according to the Investment Company Institute.

Exchange-traded funds, which track an index but are traded like stocks, have also proliferated and exploded in popularity, with nearly 1,000 now on the market.

In all, investors have poured $2.3 trillion into passive funds and ETFs, according to Morningstar. That's still far behind the $7.2 trillion in actively managed funds. But index funds are growing faster and attracting more money than actively managed funds. For the 12 months ending in July, $189 billion flowed into passively managed funds and ETFs, compared with $105 billion for their actively managed counterparts.

Money-management companies have taken indexing in a host of directions, challenging the original idea of owning the broad market. The indexing movement has been splintered into scores of smaller offerings, with mutual funds and, in particular, ETFs that slice and dice the investable universe into narrow bits.

"People are really just throwing anything at the wall to see what is going to stick," says Morningstar's Culloton.

Companies such as Arnott's Research Affiliates and Wisdom Tree now offer funds based on "fundamentally weighted indexes," which use factors other than traditional market capitalization to determine the balance of their holdings.

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Bogle and others in his camp insist those new variations aren't indexing -- that by using factors other than market capitalization, the new funds don't aim to simply replicate the market but instead are making more active bets in an attempt to produce outsize returns.

The lasting legacy of the first index mutual fund has yet to be determined, but it's clear that index funds are here to stay. "It was a brilliant idea," says Arnott. "It's an idea that has stood the test of time."

This article was reported by Yuval Rosenberg for The Fiscal Times.