Gen Z Wants A Path to Wealth, But This Isn't It.
Beware of the growing dividend movement. Money paid out of an investment has to come from somewhere. Usually, it comes out of the investment.
That is the quiet arithmetic beneath one of the fastest-growing financial movements among young Americans. In "The New American Hustle: Dividends Over Day Jobs" (Bloomberg, September 2025), Denitsa Tsekova and Vildana Hajric describe investors in their twenties and thirties moving money into funds engineered to pay out cash every month, comparing payout schedules across subreddits, Discord servers and YouTube channels, with a single goal: make work optional sooner. One told Bloomberg he didn't want his capital locked away until he was sixty-five.
The instinct deserves more respect than it usually gets. This is a generation that watched the old path close: homeownership late or never, forty years of quiet contributions, and hope. Wanting your money to do something visible before retirement is not recklessness. At Ruth, we are supportive of searching for answers to a flawed system.
The instinct is sound, however the ultimate decision is short-sighted.
A payout is not a return
When a fund distributes cash, that cash comes out of the value of what you already own. Your account shows a deposit; the position behind it is worth correspondingly less. Academics call the confusion the “free-dividends fallacy”, treating a distribution as separate from the price of the asset. It arrives like a paycheck, so it feels like income from somewhere else. It isn't.
This process only works if distributions (or dividends) are reinvested. This process becomes troublesome if the distributions cease working for the investor. If the distributions sit idle, then they can be categorized as something of a tax on projected long-term passive income, and worse yet if spent on consumable or depreciating goods then such dividends can be viewed as a loss. In either context, dividends are, more often than not, inefficient to those of us with long-term investment horizons.
The upside is what's being sold
The strategies producing the largest payouts do not find that money. They manufacture it, generally by selling off part of the future gain of the underlying investment in exchange for cash today. Certainty now, in exchange for future gains that are likely to be compounded (disclaimer: future gains are of course uncertain). Which is why the cost rarely looks like a cost or fee. It often feels like an invisible void.
Two more arrive quietly. Distributions are taxable events the holder doesn't control, and depending on how a payout is generated, it can be taxed less favorably than long-term capital gains. When dividends are taxed as income or short term gains, a long-term asset becomes a short-term paycheck — the most durable advantage a young investor has is time, and monthly cash flow spends it first.
DISCLAIMER: CONSIDER YOUR OWN TAX SITUATION AND CONSULT AN ADVISER AND/OR TAX PROFESSIONAL.
What's actually missing
The members of the dividend craze and the people Ruth was built for are not trying to be rich by Friday (although they probably would not mind…). They are trying to own something, early enough for it to matter. What they are short of is market exposure and the years to hold it, which is precisely what monthly distributions consume.
Ruth's view is that most people are handed two options and both are broken. Safe but undesirable: contribute quietly, stay underexposed, wait. For the safe but undesirable crowd, returns are often capped by the market’s broad return. The second bucket of investments can be categorized as desirable but inadvisable: crypto, sports betting, margin trading, and individual stock picking are a few examples. Income investing looks like a third option because it is calm and it feels responsible. We believe it is categorized in the second category.
We believe a long time horizon can support more equity exposure than conventional wisdom holds, and that holding that exposure responsibly means minimizing expenses, reducing margin calls, and eliminating volatility decay. That is why Ruth is built the way it is: low-cost, non-recourse capital — you can never owe more than you put in — only applying the extra exposure to the broad market index. Nothing that asks you to hand back the compounding in order to feel like something is happening.
Freedom does not mean taking chips off the table. Financial success means owning something long enough for it to matter.
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This is for informational purposes only and is not financial advice. Investing involves risk, including the possible loss of principal.