Ever since it opened, the Vanguard 500 Index Fund (VFINX) has been the flagship for growth at the company started by John Bogle.

But some 32 years after it launched, the granddaddy of index mutual funds has now lost its mantle as the biggest at the indexing fund giant.

At the end of August, the Vanguard Total Stock Market Index Fund (VTSMX) had attracted $107.5 billion in assets. That compares to $107 billion for the legendary VFINX, which tracks the S&P 500 index, according to Vanguard.

The first-ever retail index fund, VFINX was a big ingredient in propelling Vanguard founder and ex-chairman Bogle and his upstart fund shop to the top of the industry. It launched in August of 1976.

The total stock market approach, as championed by VTSMX, came along in April 1992. It followed the Wilshire 5000 index that took an all-caps approach that weighted its constituents by market-cap sizes. Three years ago, it switched to a MSCI benchmark.

With the multi-year run in small-caps, at least part of the reason for VTSMX's popularity is no doubt related to short-term performance. For example, VFINX had returned -14.18% so far this year heading into Monday; it has lost nearly 14% in the past 12 months, according to Morningstar.

Compare that to VTSMX, which was down 13.08% so far this year. In the past 12 months, it has also outperformed VFINX by better than 1 percentage point.

Even going back longer has shown a slight advantage for the total stock market fund. In the past three years, VFINX had gained 2.53%; in the past five years it was up some 4.84% through last week.

Compare that to VTSMX's 3.03% and 6.71%, in each respective rolling period. Then take a look at 10-year performances and the gap gets wider: VFINX was up 4.6% and VTSMX had returned 5.64%.

But index mutual fund investors are notoriously long-term oriented, especially those investing through Vanguard's fund complex.

Unique Circumstances 

So while the asset flip-flop at the top of Vanguard's lineup is notable from a performance standpoint, it probably points less to investors fleeing from VFINX than to a unique set of circumstances that have helped to push VTSMX to No. 1 in Vanguard's lineup.

For one, the TSM fund serves as the domestic component of Vanguard's popular target-date retirement family. That has been a big asset gather in retirement accounts and helped fuel VTSMX's rise. It's also a main building block in the company's LifeStrategy funds as well.

But another important growth driver is that the TSM index fund has an exchange-traded funds share class. Through August, the Vanguard Total Stock Market ETF (AMEX: VTI) had contributed around $10.4 billion to the $107.5 billion total for both share classes. It's one of the lowest-cost ETFs on the market, with an expense ratio of 7 basis points.

Another advantage in the asset-gathering aspect of VTMSX vs. VFINX is the fact that the total stock market approach has proved popular in newer funds of funds at Vanguard. Most notably those are the firm's target-date retirement funds, which have grown to around $43.9 billion in assets, and its $26 billion LifeStrategy line of life cycle funds.

A Vanguard spokesperson explained that the Total Stock Market Index Fund is the domestic stock component of the company's target-date fund family, a big asset gatherer for retirement investors, and the fund also has an ETF share class. Both of those markets have been growing areas for Vanguard and have helped to grow the assets in the Total Stock Market Fund.

From Vanguard's perspective, the good news is that its flagship investment being knocked off the top of the hill is just another sign of the success of indexing, in general.

"It's a positive sign that more investors are embracing indexing in all forms. The S&P 500 fund practically started the concept of indexing for the individual investor in 1976, and it was not immediately successful either. It took about 20 years to catch the public eye, and it's another encouraging sign that both funds are widely held now, and ETFs, in particular, garnering more and more of investor assets," said the Vanguard spokesperson. 

He added the company has long encouraged investors to look at the total market fund for complete U.S. market exposure, because the S&P 500 fund is large-cap oriented.

The S&P 500 Fund is a great core holding when complemented with an extended market portfolio, he noted, but most investors over time have been leaning toward total market funds for the U.S. due to its all-in-one approach.