What Buffett’s Investing Rules Say About SCHD

There is no public record of Warren Buffett recommending or commenting on SCHD, and Berkshire Hathaway does not own it. Buffett’s best-known advice for ordinary investors is to buy a low-cost S&P 500 index fund, not a dividend fund, and Berkshire itself has paid only one dividend in its history, in 1967.

Yet SCHD shares a surprising amount with Buffett’s approach. Two of its largest holdings, Coca-Cola and Chevron, are also major Berkshire holdings, and its rules favour the kind of financially strong, cash-generating companies Buffett has spent his career buying. Understanding both the overlap and the differences tells you a lot about what SCHD is and is not.

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This guide is part of FRC’s complete guide to SCHD, which starts with what SCHD is and how it works. It looks at what Buffett has actually said about index funds and dividends, what Berkshire owns, how SCHD compares and what investors can learn from the comparison.

Does Berkshire Hathaway Own SCHD?

No. Berkshire Hathaway’s investment portfolio is made up almost entirely of individual company shares, such as Apple, American Express, Bank of America and Coca-Cola, rather than funds.

For several years, Berkshire held small positions in two S&P 500 ETFs, but they were tiny compared with its company holdings, and it sold them by the end of 2024. It has never reported owning SCHD or any other dividend ETF.

That is not a judgment on SCHD. Berkshire manages hundreds of billions of dollars and has the resources to buy whole companies or large stakes directly, so a fund that holds a basket of shares has little use for it.

What Buffett Recommends for Ordinary Investors

Buffett’s advice for people who are not professional investors has been consistent for decades: buy a low-cost index fund that tracks the S&P 500 and hold it for the long term. In his 2013 letter to shareholders, he wrote that the instructions for the money left to his wife were to put 90% in a very low-cost S&P 500 index fund, adding that he suggested Vanguard’s, and 10% in short-term government bonds.

His reasoning is that most investors, including most professionals, fail to beat the market after fees. A cheap fund that owns the whole market avoids high fees, avoids the risk of picking the wrong companies and lets the investor benefit from the long-term growth of American business.

He has never named SCHD in that advice. But SCHD shares two of the features he values most: a very low fee of 0.06% a year and a long-term, rules-based approach that removes emotional decisions.

How SCHD Differs From Buffett’s Index Fund Advice

The S&P 500 holds around 500 of the largest US companies, weighted by size, including the giant technology firms that pay small dividends or none at all. SCHD holds around 100 companies, chosen for their dividends and financial strength.

That makes SCHD a narrower, more specialised fund. It deliberately leaves out many fast-growing companies and real estate investment trusts, and it leans towards consumer staples, healthcare, energy and industrials.

Over the past ten years, that difference has meant SCHD’s total return trailed the S&P 500, as technology companies led the market. SCHD paid a much higher and faster-growing dividend, but an investor who followed Buffett’s simple index fund advice would have ended up with more money overall. FRC’s guide to SCHD vs VOO compares SCHD with a popular S&P 500 fund.

What Every Investor Needs to Know

Following a famous investor’s name is one of the most common ways people end up owning something they do not understand. A headline saying a billionaire likes or dislikes a fund tells you nothing about whether it suits your own income, timeline and tolerance for risk.

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Buffett’s Million-Dollar Bet on Index Funds

Buffett has done more than talk about index funds. In 2007 he made a $1 million bet that a low-cost S&P 500 index fund would beat a selection of hedge funds over the ten years from 2008 to 2017.

The index fund won by a wide margin. Over the decade it returned around 7.1% a year, while the hedge funds chosen by his opponent averaged around 2.2% a year after their fees. Buffett used the result to show how much high fees eat into investors’ returns.

He has repeated the same advice many times since, so the answer to whether he still recommends index funds is yes. His favourite for ordinary investors remains a low-cost fund that tracks the S&P 500.

Where SCHD and Berkshire Overlap

Two of SCHD’s ten largest holdings are also among Berkshire’s biggest investments. Coca-Cola is one of SCHD’s top holdings and one of Berkshire’s longest-held positions, and Chevron is a top SCHD holding and a large Berkshire stake, although Berkshire reduced it in early 2026.

Both companies fit SCHD’s rules for the same reasons they fit Buffett’s: long histories of paying and raising dividends, strong cash flows and dominant positions in their markets. Buffett has often said he looks for businesses with lasting competitive advantages, which he calls moats.

SCHD’s index does not look for moats directly, but its screens for cash flow, return on equity and ten years of unbroken dividends tend to favour the kind of mature, profitable businesses that often have them.

What Buffett Thinks About Dividends

Buffett’s view of dividends is more nuanced than many investors assume. Berkshire itself does not pay one, because Buffett has argued that if a company can reinvest its profits at a high rate of return, shareholders are better off if it keeps the money.

But he clearly values dividends from the companies he owns. Berkshire receives hundreds of millions of dollars a year in dividends from Coca-Cola alone, on shares it bought between 1988 and 1994, and Buffett has written about how those payments have grown far beyond what Berkshire originally paid for the shares.

The difference is about where the money is best used. For Berkshire, which can buy entire businesses with the cash, retaining profits made sense. For an individual investor who needs income, a growing dividend can be exactly what they want.

Buffett, Coca-Cola and Yield on Cost

Berkshire’s Coca-Cola investment is one of the best-known examples of dividend growth over time. Berkshire paid around $1.3 billion for its 400 million Coca-Cola shares, and the annual dividends on those shares now exceed $800 million.

That means Berkshire earns more than 60% a year on its original cost in dividends alone, without having bought another share. This is the power of yield on cost, and it is the same effect SCHD investors hope to benefit from as its dividend grows.

SCHD’s annual dividend per share rose from around $0.42 in 2016 to around $1.05 in 2025. An investor whose shares yielded around 3.3% when bought in 2016 would now be earning over 8% a year on their original cost. FRC’s guide to SCHD’s dividend growth explains how that growth has varied over the years.

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Buffett’s Principles and How SCHD Measures Up

Buffett has long favoured low costs, and SCHD’s 0.06% fee is among the lowest of any dividend fund. On a $100,000 holding, that is around $60 a year.

He has also stressed holding for the long term. In his 1988 letter to shareholders, he wrote that “our favorite holding period is forever”, and SCHD is built for investors who plan to hold for years, not trade in and out.

He also values businesses that can survive bad times. SCHD’s dividend rose through both the 2020 crash and the 2022 bear market, although its share price fell sharply in both, falling by around a third in 2020.

Where SCHD and Buffett’s Approach Part Ways

Buffett is a concentrated investor. A handful of companies make up most of Berkshire’s portfolio, and he has said that wide diversification makes little sense for someone who knows what they are doing. SCHD takes the opposite approach, spreading money across around 100 companies with no more than 4% in any one.

SCHD’s holdings also change every year at its March reconstitution, sometimes significantly. In 2026, around 31% of the portfolio was replaced, a level of turnover far above Buffett’s style of buying great businesses and holding them for decades, as he has with Coca-Cola and American Express.

And SCHD includes dividend yield as one of its selection measures, while Buffett focuses on the quality and price of a business, not the size of its payout. A company that pays a high dividend is not necessarily one he would buy.

Would Buffett Approve of SCHD for Ordinary Investors?

Nobody can say for certain, and it would be wrong to claim Buffett has endorsed SCHD. What can be said is that SCHD meets several of the tests he has set out for ordinary investors: very low cost, broad diversification, no need to pick individual stocks and a long-term approach.

It differs from his advice in one major way. Buffett has recommended a fund that owns the whole market, while SCHD owns a selected slice of it, chosen by rules that favour dividends.

An investor who wants to follow Buffett’s advice most closely would buy an S&P 500 index fund. An investor who wants a growing income from established, financially strong companies might prefer SCHD, or combine the two.

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Buffett’s Approach in Retirement

Buffett’s 90/10 instruction for his wife’s inheritance is often discussed as a retirement plan: mostly a low-cost index fund for long-term growth, with a slice of short-term government bonds to draw on when markets fall. The bonds mean the stock fund never has to be sold in a downturn.

Many retirees who own SCHD follow a similar idea, holding cash or bonds for near-term spending so they can leave their dividend fund untouched in a bad year. The difference is that SCHD’s dividends provide a regular income on top. FRC’s guide to whether SCHD is good for retirement looks at how retirees combine it with other investments.

Berkshire’s Leadership Has Changed

Buffett stepped down as Berkshire Hathaway’s chief executive at the end of 2025, handing the role to Greg Abel, while remaining chairman. Since then, Berkshire has continued to adjust its portfolio, trimming some holdings such as Chevron and adding to others.

That means Berkshire’s future investments will increasingly reflect decisions made by its new leadership. Investors who follow Berkshire’s filings to copy its moves should remember that the portfolio changes over time and that the reasons behind each change are rarely published.

The lessons in Buffett’s letters, about low costs, long holding periods and understanding what you own, remain as relevant as ever.

Myths About Buffett and SCHD

One common myth is that Buffett’s 90/10 plan means 90% in VOO and 10% in SCHD. It does not. His 90/10 instruction was 90% in a low-cost S&P 500 index fund and 10% in short-term government bonds, with no dividend fund involved.

Another is that Berkshire owns SCHD, or that Buffett has called it his favourite ETF. Neither is true, and headlines describing SCHD as a “Buffett-style” fund are describing a similarity in approach, not an endorsement.

A third is that Buffett dislikes dividends because Berkshire does not pay one. In fact, Berkshire collects billions of dollars a year in dividends from the companies it owns.

Buffett’s Own Mistakes

Even Buffett gets things wrong, and he has been open about it. He has described buying Berkshire Hathaway itself, then a struggling textile company, as one of his biggest mistakes, because it tied up capital in a declining business for years.

He has also called the purchase of Dexter Shoe, paid for with Berkshire shares in 1993, one of his worst deals, because the business soon became worthless while the shares he gave away kept rising in value.

His willingness to admit mistakes is one reason his letters are so widely read. It is also a reminder that no investor, however successful, is right every time.

Copying Famous Investors: The Risks

Many investors look to Buffett or other well-known figures for guidance on what to buy. Berkshire publishes its US holdings every quarter in a regulatory filing, and many websites track every change.

Copying those moves has drawbacks. The filings are published weeks after the end of each quarter, so the positions may already have changed, and they show what was bought but not why, at what price or for how long it will be held.

A famous investor’s choices also reflect their own circumstances, which are very different from those of someone saving for retirement or living on a portfolio. The more useful lesson is to understand the principles and apply them to your own situation.

What Investors Can Learn From the Comparison

The first lesson is that costs matter. Both Buffett’s index fund advice and SCHD rely on keeping fees very low, so more of the return stays with the investor.

The second is that patience matters. Berkshire’s Coca-Cola dividends and SCHD’s growing payouts both show how income can build over decades, but only for investors who hold on through the bad years.

The third is that no single fund is right for everyone. The S&P 500 has delivered more growth over the past decade, while SCHD has delivered more income, and the right choice depends on what you need your money to do.

Common Mistakes When Using Buffett to Choose Investments

Assuming Buffett owns or recommends SCHD. He has never publicly endorsed it, and Berkshire does not own it.

Copying Berkshire’s trades without context. Its filings are delayed and do not explain the reasons behind each move.

Confusing Berkshire’s dividend policy with Buffett’s view of dividends. Berkshire does not pay one, but it collects large dividends from the companies it owns.

Treating any fund as a substitute for understanding. Buffett’s own advice is to invest only in what you understand.

Your portfolio deserves an educated investor. FRC’s three progressive ETF programmes, from ETF Investing for Beginners to Advanced ETF Investing, teach you to judge funds on their merits and build a portfolio around your own goals.

Common Questions

Does Warren Buffett like SCHD? There is no public record of Buffett commenting on or recommending SCHD. His best-known advice for ordinary investors is to buy a low-cost S&P 500 index fund.

Does Berkshire Hathaway own SCHD? No. Berkshire’s portfolio is made up mainly of individual company shares, and it has never reported owning SCHD.

What ETF does Warren Buffett recommend? Buffett has recommended a very low-cost S&P 500 index fund for most investors, and has said the money left to his wife should be 90% in such a fund and 10% in short-term government bonds.

Does Berkshire own any of the same companies as SCHD? Yes. Coca-Cola and Chevron are among SCHD’s largest holdings and are also major Berkshire investments.

Does Warren Buffett like dividend stocks? He values the dividends Berkshire receives from companies such as Coca-Cola, but Berkshire itself does not pay a dividend because Buffett believes it can reinvest its profits more effectively.

Is SCHD better than the S&P 500? Over the past ten years, the S&P 500 has delivered a higher total return, while SCHD has paid a higher and faster-growing dividend. Which is better depends on whether you want growth or income.

What is Warren Buffett’s favourite index fund? A low-cost fund that tracks the S&P 500. In his 2013 letter, he suggested Vanguard’s S&P 500 fund for the money left to his wife.

Does Warren Buffett still recommend index funds? Yes. He has recommended low-cost S&P 500 index funds for ordinary investors for decades, and won a ten-year, $1 million bet that an index fund would beat a group of hedge funds.

Is Buffett’s 90/10 plan VOO and SCHD? No. His 90/10 instruction is 90% in a low-cost S&P 500 index fund and 10% in short-term government bonds.

What was Warren Buffett’s worst investment? He has described buying Berkshire Hathaway, then a struggling textile company, and buying Dexter Shoe with Berkshire shares as two of his biggest mistakes.

Who runs Berkshire Hathaway now? Greg Abel became chief executive at the start of 2026, with Buffett remaining chairman.

Should I copy Berkshire Hathaway’s portfolio? Its filings are published weeks after each quarter ends and do not explain the reasons for each trade, so copying them carries real risks. Understanding the principles behind them is usually more useful.

Your Portfolio Deserves an Educated Investor

Warren Buffett has never publicly endorsed SCHD, and Berkshire does not own it. His advice for ordinary investors is a low-cost S&P 500 fund, but SCHD shares his emphasis on low costs, long holding periods and financially strong businesses, and two of its biggest holdings are long-standing Berkshire investments.

Don’t let a lack of investment knowledge become the most expensive mistake you ever make. FRC’s three progressive ETF programmes take you from how ETFs and dividends work, through building a portfolio around your own goals, to managing risk and tax across everything you own. FRC’s programmes and memberships are open to everyone, whether you are investing $500 or $500,000.

Invest in understanding the market before investing in the market itself. Learn the principles, then make your own decisions.