A Wellesley alternative

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A Wellesley alternative

Post by hoops777 »

1/3 SCHD Schwab 100 dividend fund
1/3 VCIT Vanguard corp etf
1/3 Intermediate treasury
Reason....Will share after I absorb all of the attacks.
Last edited by hoops777 on Mon Feb 06, 2017 6:10 pm, edited 1 time in total.
K.I.S.S........so easy to say so difficult to do.
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Re: A Wellesley alternative

Post by tludwig23 »

Taxable or tax-deferred?
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Re: A Wellesley alternative

Post by hoops777 »

All tax deferred
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Re: A Wellesley alternative

Post by AlohaJoe »

I don't memorise random tickers so I have no idea what those funds are.
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Re: A Wellesley alternative

Post by aceoperations »

I have no idea what all those letters mean. It might help to fill in the fund names, instead of just ticker. You'll probably get more responses - just sayin'
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Re: A Wellesley alternative

Post by hoops777 »

Wellesley is such an iconic venerable fund I feel like I may get struck by lightening for trying to come up with an alternative :D
Reasons
1-Hate putting a very large pct of my retirement in one managed fund no matter what it's history is because however unlikely things can change
2-Do not like that it has little or no treasuries
3-SCHD has 100 stocks based on an index,yields more and is more defensive than the stock portion of Wellesley.
4-Allows me a bit more choice when doing RMD's
5-Can change the allocation easily if I want to down the road.
K.I.S.S........so easy to say so difficult to do.
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Re: A Wellesley alternative

Post by hoops777 »

Deleted
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Re: A Wellesley alternative

Post by Theoretical »

For the equity portion, I'd consider either American Funds Investment Company of America or Vanguard's own Equity Index fund.

For the bonds, I'd go with a cheap active corporate fund focused on high quality bonds.
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Re: A Wellesley alternative

Post by Tamales »

hoops777 wrote:1/3 SCHD Schwab 100 dividend fund
1/3 VCIT Vanguard corp etf
1/3 Intermediate treasury
Reason....Will share after I absorb all of the attacks.
I deleted the chart I posted. Just noticed that your choices don't have a 10 year history so my chart was backfilling.
Looking at 5 year instead, your clone does fine.
Last edited by Tamales on Mon Feb 06, 2017 9:44 pm, edited 1 time in total.
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Re: A Wellesley alternative

Post by Miriam2 »

Hoops - have you seen the other Wellesley thread percolating on the forum 8-)
viewtopic.php?f=10&t=209617
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Re: A Wellesley alternative

Post by hoops777 »

Yes I did read most of those posts.I know how good the fund has been.When you are home sick and bored too death it is easy to overthink things.On the other hand if anyone could curse the fund by buying it ,it would be me :D Seriously.
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Re: A Wellesley alternative

Post by hoops777 »

Tamales nice chart.A little surprised at the numbers but I do not see what your clone consists of.
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Re: A Wellesley alternative

Post by Dottie57 »

Theoretical wrote:For the equity portion, I'd consider either American Funds Investment Company of America or Vanguard's own Equity Index fund.

For the bonds, I'd go with a cheap active corporate fund focused on high quality bonds.
American Funds has a large front load when I last looked.
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Re: A Wellesley alternative

Post by hoops777 »

I guess looking for a Wellesley alternative is akin to looking to replace Tom Brady :D
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Re: A Wellesley alternative

Post by Sheepdog »

I couldn't find a replacement either so I just stuck with it for lots of years!!!
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Re: A Wellesley alternative

Post by Christine_NM »

hoops -

Don't understand your reason "little to no Treasuries". Wellesley portfolio is 16% Treasury/Agency. The first page of the bond holdings list shows many billions of dollars worth of UST notes and bonds.
16% cash 49% stock 35% bond. Retired, w/d rate 2.5%
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Re: A Wellesley alternative

Post by hoops777 »

Sorry,that is a big oversight on my part.For some reason I had it stuck in my mind that Wellesley had all corporates.Stupid stupid stupid.I am done and I will just go with the wise,time tested choice.I apologize in advance for any underperformance in the fund going because of the hoops curse :D
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Re: A Wellesley alternative

Post by Christine_NM »

hoops777 wrote:I am done and I will just go with the wise,time tested choice.I apologize in advance for any underperformance in the fund going because of the hoops curse :D
I know what you mean, I had the same curse but Wellesley broke it. In 2009, at the bottom, in despair, I combined my Wellington and Intermediate Bond Index, both badly shrunken, into Wellesley (NAV 41 then) for a fresh start.

The curse mostly applies to buying popular, volatile stuff at the top. Wellesley has never been popular (outside BH) or volatile.
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Re: A Wellesley alternative

Post by willthrill81 »

Christine_NM wrote:
hoops777 wrote:I am done and I will just go with the wise,time tested choice.I apologize in advance for any underperformance in the fund going because of the hoops curse :D
I know what you mean, I had the same curse but Wellesley broke it. In 2009, at the bottom, in despair, I combined my Wellington and Intermediate Bond Index, both badly shrunken, into Wellesley (NAV 41 then) for a fresh start.

The curse mostly applies to buying popular, volatile stuff at the top. Wellesley has never been popular (outside BH) or volatile. I find that very unfortunate for many. I think that Wellesley would be a fine choice for a great many investors.
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Re: A Wellesley alternative

Post by leonard »

How about the Lifestrategy with the appropriate stock/bond ratio.
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Re: A Wellesley alternative

Post by TagmoreClock »

hoops777 wrote:1/3 SCHD Schwab 100 dividend fund
1/3 VCIT Vanguard corp etf
1/3 Intermediate treasury
Reason....Will share after I absorb all of the attacks.
Here is my alternative.
60 VBMFX Vanguard Total Bond Market Index Fd (You can substitute with AGG, BND, and many more funds which trace same index)
40 MDY S&P Midcap (You can substitute with IJH, or any MID cap index fund)

Here is link, you will see it traces very well.
https://www.portfoliovisualizer.com/bac ... tion3_2=40
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Re: A Wellesley alternative

Post by willthrill81 »

"If it ain't broke, don't fix it."

Why do you need an alternative to a 47 year old fund with a track record as rock solid as VWINX??
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Re: A Wellesley alternative

Post by Nowizard »

Willthrill: Beat me to it. +1

Tim
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Re: A Wellesley alternative

Post by nisiprius »

You've done the obvious? Unfortunately you've chosen ETFs with short track records so it isn't very meaningful--could you perhaps, just to examination, suggest older choices for the first two funds? On the face of it, your portfolio (portfolio 1) has had marginally less return, marginally less risk, and a very slightly lower Sharpe ratio than Wellesley ("portfolio" 2, 100% VWINX).

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Re: A Wellesley alternative

Post by Theoretical »

TagamoreClock's has a 21 year history, and from factor regressions it has lower weightings on value and a positive weighting on size (as opposed to Wellesley's negative size loading). With large and midcaps in particular, this seems to be a fairly clear approach to take.
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Re: A Wellesley alternative

Post by hoops777 »

It is very difficult to beat Wellesley especially if you consider how well it performed during the worst of times.Their allocation is pretty easy to keep the same even if they change managers over time.
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Re: A Wellesley alternative

Post by hoops777 »

TagamoresClock portfolio produces significantly less income so I disagree since Wellesley is an income fund.
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Re: A Wellesley alternative

Post by Vegomatic »

Vanguard Intermediate-Term Investment Grade Fund and Vanguard Equity Income Fund (thanks to dkturner, below)

60% VFIDX, 40% VEIPX (or Admiral Class Equivalents)

http://tinyurl.com/wells-clone
Last edited by Vegomatic on Thu Feb 09, 2017 10:37 pm, edited 1 time in total.
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Re: A Wellesley alternative

Post by Happy2BeFree »

hoops777 wrote:I guess looking for a Wellesley alternative is akin to looking to replace Tom Brady :D
As a Wellesley and a Brady fan, I would say that there is no substitute for either!! :sharebeer
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Re: A Wellesley alternative

Post by groovy9 »

hoops777 wrote:1/3 SCHD Schwab 100 dividend fund
1/3 VCIT Vanguard corp etf
1/3 Intermediate treasury
Reason....Will share after I absorb all of the attacks.
I was poking around portfolio visualizer earlier and found that 70% intermediate treasuries 30% SCV as well as 60% treasuries 40% consumer staples both have had similar performance and volatility to wellesley. You could probably cobble together a bunch of portfolios that do. Personally, I like the 60% treasuries 40% staples for "can't afford much shrinkage" type uses.
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Re: A Wellesley alternative

Post by linenfort »

Vegomatic wrote:60% VFIDX, 40% VEIPX (or Admiral Class Equivalents)

http://tinyurl.com/wells-clone
Interesting!
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Re: A Wellesley alternative

Post by willthrill81 »

groovy9 wrote:
hoops777 wrote:1/3 SCHD Schwab 100 dividend fund
1/3 VCIT Vanguard corp etf
1/3 Intermediate treasury
Reason....Will share after I absorb all of the attacks.
I was poking around portfolio visualizer earlier and found that 70% intermediate treasuries 30% SCV as well as 60% treasuries 40% consumer staples both have had similar performance and volatility to wellesley. You could probably cobble together a bunch of portfolios that do. Personally, I like the 60% treasuries 40% staples for "can't afford much shrinkage" type uses.
If you really wanted to diversify your risk but try to keep it in check, you could go 1/3 Wellesley, 1/3 with 70% ITT and 30% SCV, and 1/3 with 60% ITT and 40% staples. That works out to 33% Wellesley, 44% ITT, 10% SCV, and 13% staples.

I ran that through Portfolio Visualizer using Vanguard's funds (VWINX, VFITX, VISVX, VCSAX). It can't go back further than 2005, but during that time this portfolio's CAGR was 6.49% compared to VWINX's 6.74%. The notable difference between the two was in the maximum drawdown, just 12.00% for this portfolio compared to 18.87% for VWINX.

Alternatively, you could do even better in this portfolio without VWINX at all. Put 60% ITT, 25% staples, and 15% SCV. The CAGR from 2005 to 2017 was 6.68% (just .09% behind VWINX), but the worst year only lost 1.06% (compared to 9.84% for VWINX), and the maximum drawdown recovery period was just 12 months. Talk about a defensive portfolio with solid performance! If a portfolio can go through 2008 with only a 1% loss but still come within a hair's breadth of Wellesley's performance, that looks great to me.

I dub it the "Groovy-Will" portfolio!
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Re: A Wellesley alternative

Post by groovy9 »

willthrill81 wrote: Alternatively, you could do even better in this portfolio without VWINX at all. Put 60% ITT, 25% staples, and 15% SCV. The CAGR from 2005 to 2017 was 6.68% (just .09% behind VWINX), but the worst year only lost 1.06% (compared to 9.84% for VWINX), and the maximum drawdown recovery period was just 12 months. Talk about a defensive portfolio with solid performance! If a portfolio can go through 2008 with only a 1% loss but still come within a hair's breadth of Wellesley's performance, that looks great to me.

I dub it the "Groovy-Will" portfolio!
:sharebeer
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Re: A Wellesley alternative

Post by hoops777 »

Great numbers Willthrill but what about the income level? :DThere always seems to be something that does not quite equal it.
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Re: A Wellesley alternative

Post by groovy9 »

hoops777 wrote:Great numbers Willthrill but what about the income level? :DThere always seems to be something that does not quite equal it.
Wellesley is, by all accounts, an excellent fund. I wouldn't have lost any sleep if it was my only emergency fund option. The moral of the story is just that it's not magic. :happy
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Re: A Wellesley alternative

Post by willthrill81 »

hoops777 wrote:Great numbers Willthrill but what about the income level? :DThere always seems to be something that does not quite equal it.
By income, do you mean dividends? That will vary from year to year, and Portfolio Visualizer only looks at total returns, not just dividends. Considering this portfolio's composition, the dividends are going to be very similar for both.

But total returns are what really matter anyway.
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Re: A Wellesley alternative

Post by nisiprius »

willthrill81 wrote:Alternatively, you could do even better in this portfolio without VWINX at all. Put 60% ITT, 25% staples, and 15% SCV. The CAGR from 2005 to 2017 was 6.68% (just .09% behind VWINX), but the worst year only lost 1.06% (compared to 9.84% for VWINX), and the maximum drawdown recovery period was just 12 months. Talk about a defensive portfolio with solid performance! If a portfolio can go through 2008 with only a 1% loss but still come within a hair's breadth of Wellesley's performance, that looks great to me....!
When did you first formulate this portfolio in writing?
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Re: A Wellesley alternative

Post by Kevin M »

willthrill81 wrote:
hoops777 wrote:Great numbers Willthrill but what about the income level? :DThere always seems to be something that does not quite equal it.
By income, do you mean dividends? That will vary from year to year, and Portfolio Visualizer only looks at total returns, not just dividends. Considering this portfolio's composition, the dividends are going to be very similar for both.

But total returns are what really matter anyway.
Exactly. You can always generate income by selling shares.

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Re: A Wellesley alternative

Post by hoops777 »

I know,but a lot of people use Wellesley by using the dividends and interest only as income if you read the posts on various threads.I know it makes little or no difference.
I would say you and others have come up with great alternatives here while also again proving what a great fund Wellesley has been.
It appears you have peaked Nisprius's interest with that one portfolio :DI would love to see his comments about it.
Last edited by hoops777 on Wed Feb 08, 2017 12:54 pm, edited 1 time in total.
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Re: A Wellesley alternative

Post by Longtermgrowth »

hoops777 wrote:1/3 SCHD Schwab 100 dividend fund
1/3 VCIT Vanguard corp etf
1/3 Intermediate treasury
Reason....Will share after I absorb all of the attacks.
How about VYM (Vanguard High Dividend Yield ETF) for the stock portion? VYM tracks the FTSE High Dividend Yield Index. Looks like Wellesley picks 60 stocks from that index, based on what I see under "Equity characteristics" here: https://personal.vanguard.com/us/funds/ ... =INT#tab=2
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Re: A Wellesley alternative

Post by willthrill81 »

nisiprius wrote:
willthrill81 wrote:Alternatively, you could do even better in this portfolio without VWINX at all. Put 60% ITT, 25% staples, and 15% SCV. The CAGR from 2005 to 2017 was 6.68% (just .09% behind VWINX), but the worst year only lost 1.06% (compared to 9.84% for VWINX), and the maximum drawdown recovery period was just 12 months. Talk about a defensive portfolio with solid performance! If a portfolio can go through 2008 with only a 1% loss but still come within a hair's breadth of Wellesley's performance, that looks great to me....!
When did you first formulate this portfolio in writing?
That post.
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Re: A Wellesley alternative

Post by dkturner »

It's also possible to replicate the Wellesley portfolio with a combination of 35-40% Vanguard Equity Income Fund and 60-65% Vanguard Intermediate-Term Investment Grade Fund. The bond fund will have a shorter duration, which may be a plus since we likely have seen the end of the 35 year bond bull market that began in 1982.
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Re: A Wellesley alternative

Post by linenfort »

dkturner wrote:It's also possible...
See Vegomatic's post above with the link.
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Re: A Wellesley alternative

Post by groovy9 »

willthrill81 wrote:
nisiprius wrote:
willthrill81 wrote:Alternatively, you could do even better in this portfolio without VWINX at all. Put 60% ITT, 25% staples, and 15% SCV. The CAGR from 2005 to 2017 was 6.68% (just .09% behind VWINX), but the worst year only lost 1.06% (compared to 9.84% for VWINX), and the maximum drawdown recovery period was just 12 months. Talk about a defensive portfolio with solid performance! If a portfolio can go through 2008 with only a 1% loss but still come within a hair's breadth of Wellesley's performance, that looks great to me....!
When did you first formulate this portfolio in writing?
That post.
Having just read Larry Swedroe's book with the 30/70 SCV/Bonds "Larry portfolio," the above strikes me as an even more Larry Larry portfolio, though he'd probably tilt it a bit back in the direction of more bonds.

Basically, the long track record of consumer staples makes it look a lot like a free lunch when you're looking for low volatility but more returns than just bonds. e.g. after retirement, emergency funds, excess business cash, etc. It's fairly logical (people gotta eat and it's hard to stop smoking) AND it consistently performs. 8-)
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Re: A Wellesley alternative

Post by willthrill81 »

groovy9 wrote:
willthrill81 wrote:
nisiprius wrote:
willthrill81 wrote:Alternatively, you could do even better in this portfolio without VWINX at all. Put 60% ITT, 25% staples, and 15% SCV. The CAGR from 2005 to 2017 was 6.68% (just .09% behind VWINX), but the worst year only lost 1.06% (compared to 9.84% for VWINX), and the maximum drawdown recovery period was just 12 months. Talk about a defensive portfolio with solid performance! If a portfolio can go through 2008 with only a 1% loss but still come within a hair's breadth of Wellesley's performance, that looks great to me....!
When did you first formulate this portfolio in writing?
That post.
Having just read Larry Swedroe's book with the 30/70 SCV/Bonds "Larry portfolio," the above strikes me as an even more Larry Larry portfolio, though he'd probably tilt it a bit back in the direction of more bonds.

Basically, the long track record of consumer staples makes it look a lot like a free lunch when you're looking for low volatility but more returns than just bonds. e.g. after retirement, emergency funds, excess business cash, etc. It's fairly logical (people gotta eat and it's hard to stop smoking) AND it consistently performs. 8-)
After nisiprius's interest in the "Groovy-Will" portfolio (60% ITT [VFITX], 25% staples [VCSAX], 15% SCV [VISVX]), I've been running some comparisons to other portfolios and think that we may have stumbled onto a portfolio that is superior to the Larry Portfolio. From 2005, the inception year of VCSAX, to current, it's CAGR is .99% higher than the LP, it's worst year was 2009 with a 1.09% loss as opposed to the LP's loss of 1.74%, and it's maximum drawdown was .80% lower (11.42% instead of LP's 12.22%). In short, it has better returns with lower volatility. Surprisingly, the GWP was only behind the S&P 500 by .91% over this same period, but with a fraction of the latter's volatility.

An obvious shortcoming of this analysis is the relatively brief time frame (13 years) of the analysis. Further, Vanguard's staples fund (VCSAX) provides notably better performance in the GWP to other staples funds I've tried, so the apparent value of the GWP may partly be a function of this specific fund.

A weakness of the GWP is its relative lack of international exposure. Over the long-term, this could swing the LP in front of the GWP. But at a minimum, I think that we may have found a portfolio that is at least very comparable, if not somewhat superior, to Wellesley.
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Re: A Wellesley alternative

Post by alpenglow »

groovy9 wrote:AND it consistently performs.
Until it doesn't.
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Re: A Wellesley alternative

Post by groovy9 »

willthrill81 wrote: An obvious shortcoming of this analysis is the relatively brief time frame (13 years) of the analysis. Further, Vanguard's staples fund (VCSAX) provides notably better performance in the GWP to other staples funds I've tried, so the apparent value of the GWP may partly be a function of this specific fund.
I actually like RHS (Guggenheim equal weight consumer staples) and IJS (Ishares S&P 600 value) more than the vanguard options, and over the time that they've all existed (since 2007), they outrun Wellesley and S&P500 both, with lower volatility than both. RHS has had stupidly good performance, though, admittedly.

http://tinyurl.com/jqw7o56

Honestly, I don't think fund choice matters all that much. That allocation give or take a few percent in any set of good, low-cost options should look pretty similar over 20 years.
Last edited by groovy9 on Wed Feb 08, 2017 3:56 pm, edited 2 times in total.
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Re: A Wellesley alternative

Post by willthrill81 »

alpenglow wrote:
groovy9 wrote:AND it consistently performs.
Until it doesn't.
Most of us here know exactly what consistent performance means.
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Re: A Wellesley alternative

Post by alpenglow »

Please help me out here, was it the word consistent or performance that you felt I misunderstood?

Most of us here understand that past performance doesn't predict future results.
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Re: A Wellesley alternative

Post by groovy9 »

alpenglow wrote:Please help me out here, was it the word consistent or performance that you felt I misunderstood?
Most of us here understand that past performance doesn't predict future results.
Everything we know about investing is based on what HAS happened. I get that folks around here try to be realistic about what you can and can't assume, which is fine, but pretty much every asset allocation someone who isn't an author suggests is at some point met with "yeah, but you don't KNOW that'll work."

Yes. Everyone gets it. All day every day, about the head and shoulders, everywhere on Bogleheads.
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