They will be sold as traditional, open-ended mutual funds with a minimum investment of $250,000.

By contrast, a traditional mutual fund can be traded only at its price at the end of the day.

Conversely, if a stock's price drops, the value of the holding in a traditional cap-weighted fund will also fall.

In years that favor growth stocks, like 1990, they return more than traditional equity-income funds.

But without the traditional funds, "it would not have happened," he said.

They can be traded throughout the day and enjoy tax advantages over traditional mutual funds.

"It means more traditional funds are moving into activism," he said.

Vanguard plans to let current fund investors transfer money, at no cost, from their traditional mutual funds into the new products.

This is in contrast to traditional mutual funds which are only available for buying and selling at the close of business each day.

This growth is striking, given the decline in the assets of traditional mutual funds during a painful period for the stock market.