SCHD serves as an effective hedge against high-growth tech exposure because its methodology enforces annual valuation resets, maintaining attractive discounts relative to the S&P 500.

However, what many overlook is that the real bubble, at least in the AI race, will not be in the price, but in the decline in potential earnings growth . I have seen many people refer to this, but it is still misunderstood.

However, my wallet is designed for such an event for several reasons. Firstly, the core assets in my portfolio continue to increase dividend payouts regardless of market conditions.

This means that the amount of income I receive from dividends continues to grow monthly . In some cases, this is a good thing, because it allows me to reinvest dividends at lower prices, enabling me to buy more shares and thus increase my dividend income at a faster pace.

But my portfolio is protected not only in this way, but also because it forms its main pillar, SCHD, which represents about 40% of my portfolio.

When people hear this, they automatically assume that the reason SCHD is a good foothold , and an excellent diversification tool away from AI-powered, rapidly growing earnings-driven semiconductor stocks, is that SCHD doesn't focus too much on the technology sector.

This is partially true. But there is an aspect of SCHD that 90% of investors overlook, and it is perhaps one of the most important aspects to understand if you are specifically interested in SCHD to diversify your investments away from your high-growth positions.

This explains the annual revaluation of the stock. Now, what does re-evaluation mean ? Okay, let's start by clarifying some facts.

SCHD stock is currently trading within its usual range, at a discount of about 25% compared to the S&P 500 when looking at its price-to-earnings ratio. One might then automatically assume that the stock is no longer a good investment opportunity, and that its price has risen excessively.

But that's not true. Why? Okay, take a look at this article I wrote for Seeking Alpha at the beginning of 2026. One of the things I referred to in this article is the SCHD methodology.

It is very important to understand this methodology . Why? Because it indicates that the fund revalues the stocks in its portfolio annually. After some initial sorting, you will notice that the stocks are ranked by their declared annual dividend yield, and that only the top 50% are eligible for selection.

Think about what that means. If you are selecting stocks with the highest annual returns after initial screening , it most likely means that over the past year, firstly, your dividends have increased, and secondly, your stock price has also decreased, usually due to a decrease in the price-to-earnings ratio.

Therefore, by selecting the stocks with the highest return, we automatically get an annual revaluation. The price-to-earnings ratio decreases annually. For this reason, SCHD's price-to-earnings ratio typically remains within a converging range.

Meanwhile, the price-to-earnings ratio for the Standard & Poor's 500 continued to rise.

Just look at the difference based on the price- to-cash-flow ratio: a 43% discount for SCHD. Based on the price-to- book ratio, a discount of 31%. However, when looking at return on equity, a key measure of profitability, SCHD is trading at only an 8% discount to the S&P 500.

An 8% discount is not significant when considering that it is trading at a substantial discount according to various valuation criteria.

So, what am I trying to say? Well, what I'm trying to say is that SCHD is an excellent diversification tool, not only because it's not heavily reliant on the technology sector, but also because it gets an automatic annual revaluation built into the portfolio.

This makes it a great hedging tool for people like me who have large investments in artificial intelligence and semiconductors, which has undoubtedly been a major beneficiary of my personal investment portfolio, and having this type of investment in SCHD gives me complete peace of mind.

Historically, it has clearly achieved impressive overall returns and exceptional dividend growth. So , this is a quick update to my personal investment portfolio , where I'm adding capital, and why I'm still very happy with my SCHD investments.