Compounding Dividends

Compounding Dividends

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Compounding Dividends
An ETF Update - 17 Stocks Gone. 20 Added. What's Going On?
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An ETF Update - 17 Stocks Gone. 20 Added. What's Going On?

Plus some interesting companies to look into.

TJ Terwilliger's avatar
TJ Terwilliger
Apr 02, 2025
∙ Paid
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Compounding Dividends
Compounding Dividends
An ETF Update - 17 Stocks Gone. 20 Added. What's Going On?
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The very first ETF we bought for the American Portfolio just went through some big changes.

And if you understand why, you might find a few interesting investment ideas.

ETFs track indexes. When an index changes, the ETF has to change with it.

This process is called reconstitution.

Most people don’t pay attention to this. But they should.

Because when an index reconstitutes, it often drops struggling companies and adds rising stars.

SOX指数 構成銘柄 / 採用銘柄の構成比率や銘柄入れ替えなどを解説

What is reconstitution?

A stock index reconstitution is an update of the list of companies that make up a stock index. This typically happens at regular intervals, such as quarterly or annually.

Why It’s Done:

A reconstitution is done to make sure that the index is still meeting its goal. Some common changes include:

  1. Market Changes: Companies grow, shrink, or fade away. The index adjusts to reflect reality.

  2. Underperformers Get Cut: Weak companies get dropped. This improves the quality of holdings.

  3. New Leaders Emerge: Successful new companies get added.

  4. Balance Is Maintained: The index stays a reliable benchmark for investors.

Let’s dive in to the recent changes of our index to see what we can learn:

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