SCHD is the best dividend ETF; it remains a core holding for the speaker.

SCHD Fund has just made one of its biggest portfolio changes of the year. Not just for this year, but for many years. And if you are one of the millions of investors who own SCHD, and I am one of them, your portfolio looks remarkably different today.

As many of you may already know, SCHD updates its portfolio, its entire portfolio, once a year in the spring. This is the annual reconstitution, where we get a set of new stocks that are added to the portfolio and others that are excluded.

But what many people don't notice is that the fund actually performs a quarterly rebalancing. In our most recent quarterly rebalancing that just took place, we saw some big changes that I want to review with you today.

In the comments section below, it's very simple today, tell me if you own an SCHD or not.

As you can see here, this is a snapshot of my most important positions in my portfolio, and SCHD is my sixth largest investment, where I own 700 shares worth approximately $25,000.

I have held this position in my portfolio for several years, and as I have stated many times, I believe this is easily the best dividend-paying equity ETF in the market today. It has provided great diversity to my portfolio, which is dominated by technology at the top.

But a lot has just changed. In the third quarter, during the rebalancing that just took place, we saw the exposure of the technology sector jump from 8.9% to 12%. This is a huge leap upwards.

On the other hand, the healthcare sector declined from nearly 21% to 18.8%.

So, does SCHD somehow have a knack for increasing equity exposure at the right time? Remember that there is no human element here. It is a rule-based algorithm that leads to these changes.

This was not the major annual remodeling process. The SCHD fund tracks the Dow Jones Index of 100 US dividend-paying companies. The index is designed to include US companies with high dividend yields, a long track record of paying dividends, increasing those dividends, and relatively strong fundamentals.

The great annual remodeling process is something that takes place in the spring, in March. At that time, the methodology re-evaluates the selection process and identifies the companies eligible to join the index.

At that point, stocks can enter and exit effectively based on the annual selection process.

But throughout the year, the SCHD fund is also subject to quarterly weight adjustments. And that is essentially what happened here. The SCHD calendar includes the annual rebalancing in March, to determine who enters and exits the index, while quarterly weight adjustments take place in June, September and December.

What percentage does each existing share represent? The quarterly methodology sets a ceiling of 4.5% for individual stocks and 25% for individual industries at the reference point, with the excess weight being redistributed among other stocks.

This explains why we get such large moves without SCHD necessarily having to buy entirely new companies and add them to the portfolio.

Before the change, technology represented approximately 8.9% of the SCHD fund. Today the percentage is 12%. This is an increase of 3.1 percentage points, or in other words, SCHD's exposure to technology has increased by approximately 35%.

At the same time, the healthcare sector moved in the opposite direction. Its share decreased from about 21% to 18.77%. So, SCHD has become less focused on healthcare and more exposed to technology, although healthcare still carries more weight.

So, let's not overlook that. But I find all of this interesting, because one of the criticisms that investors sometimes level at SCHD is that it doesn't have enough exposure to technology.

But this is also why I prefer him and am attracted to him as an investor.

Now, I want to make an important distinction. When I say that SCHD has gained greater exposure to technology, I don't mean that it has suddenly become like "Triple Qs," far from it.

Most of the high-growth technology names that dominate the Nasdaq will probably not be found here.

This is more in line with what the SCHD fund was designed to do. Therefore, I would describe this as SCHD gaining greater technological exposure without sacrificing its profitability and quality mandate.

This may be an attractive combination for some dividend investors.

So, rebalancing is neither magic nor perfect. But I truly believe the results illustrate one of the underappreciated advantages of a disciplined, rules-based investment portfolio.

It can systematically push investors to do something emotionally difficult, which is to cut back on what has risen in price and add to what has lagged behind, because sometimes this produces very good results, and this brings us back to today.

The same basic strategy, but with different weights. Now we come to the most important question, actually. Does the rebalancing process make SCHD a better investment? I don't think a single quarterly rebalancing will suddenly change the fund, but there are some aspects that I like.

First, more exposure to the technology sector. Technology remains one of the most important sectors in the American economy, and has recently released videos discussing the exaggeration of concerns related to spending.

If you had listened to my advice on some of those recent deals, you could have already made significant gains. Recent examples of this include companies like AMD and Marvell.

But for SCHD, historically, it has had less exposure to the technology sector compared to the S&P 500. So, moving from 8.9% to 12% gives SCHD a slightly larger stake without changing the fund's identity entirely.

Secondly, we have less focus in the healthcare sector. Healthcare remains one of SCHD's largest holdings, but reducing it from around 21% to 18.8% makes the portfolio less dependent on that sector, though not a radical change.

Third, the rebalancing mechanism. The last quarter provided a great example of how to benefit from readjusting weights by returning to average performance. Again, there is no guarantee that this will happen this quarter, but I like systematic investing processes that remove emotion from portfolio decisions.

Ultimately, that's why I find SCHD interesting. It is not designed to pursue the most popular companies in the market. He does not attempt to predict which company will be the next "Nvidia".

He doesn't follow the news headlines. He also doesn't simply buy the hundred highest-yielding stocks he finds.

The core index starts with a group of U.S. stocks, requires dividend payouts for ten consecutive years, filters returns, and considers other qualifying companies. Taking into account criteria such as cash flow to debt, return on equity, dividend yield, and five-

That's a completely different strategy from the S&P 500 index, and very different from the QQQ fund. But SCHD offers a cumulative investment strategy that combines capital gains with dividend income growth.

New dividend payouts are about to be released , but this year's dividend income grew by 4.2%, with quarterly growth of 7.5%. These are distributions that have grown for almost 15 consecutive years, which is something I am pleased to see.

The number of comments I receive on SCHD videos about why I invest in SCHD instead of the S&P 500 and how it is underperforming, they don't fully understand or perhaps don't realize what they are talking about .

Firstly, I invest in both. Secondly, my investment reason is diversification.

Third, over the past year, if we're talking results, SCHD has easily outperformed the S&P 500 with a total return of 28% versus 17%. SCHD is an investment that balances my portfolio and keeps it stable when technology trading becomes volatile.

SCHD is my undisputed favorite dividend-paying exchange-traded fund , and will continue to occupy a significant portion of my portfolio going forward.

So , in short, SCHD has just made some big moves. Exposure to the technology sector jumped from approximately 9% to 12%. The share of healthcare decreased from 21% to 18.8%.

But, I think the most interesting story is not simply that SCHD owns more Qualcomm shares. But what rebalancing tells us is about the strategy itself. He is not chasing the winners of the previous quarter.

Rather, it follows a systematic process, and in the last quarter, many of the stocks that received additional weighting achieved excellent returns.

However, after seeing a significant increase in exposure to technology , I believe the technology sector could perform very well in the fourth quarter to end the year. However, now I want to hear your opinion.

Would you like SCHD to have greater exposure to technology, or would you prefer the fund to focus more on traditional defensive dividend sectors? What do you think about Qualcomm becoming the largest shareholder in SCHD?