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The New American Hustle: Dividends Over Day Jobs (bloomberg.com) 146

Posted by msmash from the how-about-that dept.
Young Americans are abandoning traditional retirement planning for dividend-focused ETFs that promise immediate income and freedom from traditional employment. Income-generating ETFs captured one in six dollars flowing into equity ETFs in 2025, pushing the sector to $750 billion -- with the most aggressive funds offering yields above 8% quadrupling to $160 billion over three years.

The r/dividends subreddit has grown tenfold to 780,000 members over five years, while YouTube channels and Discord servers dedicated to dividend investing proliferate. YieldMax's MSTY fund, offering a 90% distribution rate through complex derivatives, has underperformed MicroStrategy stock by 120 percentage points since February 2024 when dividends are reinvested -- nearly 200 points when payouts are withdrawn. Speaking to Bloomberg, finance professor Samuel Hartzmark identified this as the "free dividends fallacy," where investors fail to recognize that dividends reduce share prices rather than creating additional wealth.
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The New American Hustle: Dividends Over Day Jobs

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  • Ugh (Score:5, Interesting)

    by timeOday ( 582209 ) on Monday September 08, 2025 @10:09AM (#65646126)
    This has strong "1999 daytrader" vibes. Or "2007 house-flipping."

    As a newly retired person who really does need to live off my savings, hearing about everybody and their brother piling into the market hoping to avoid having to earn money in the first place by investing makes me think today's market probably is a bubble, and is headed for a fall. But that doesn't mean I have anywhere better or safer to keep the money other than invested. Inflation is certainly a huge risk to cash savings or long-term bonds right now. And please don't tell me Bitcoin.

    • Re:Ugh (Score:5, Funny)

      by registrations_suck ( 1075251 ) on Monday September 08, 2025 @10:12AM (#65646134)

      Have you heard about Bitcoin?

      • Have you heard about Bitcoin?

        I think I'd trust gold more than bitcoin, if both of them burst a bubble, at least gold has some intrinsic value in manufacturing to fall back on. That said if I don't trust the market I'd rather go to maybe bonds if I'm feeling like taking a chance, or else treasuries. Even with the present administration's efforts, I think if treasuries go belly up, there may be bigger concerns than having money.

    • There is no sure answer. Just follow the basic principles. Make certain that your investments are diversified and not in fly-by-night investments.

      • Re: (Score:2)

        by Junta ( 36770 )

        Of course, that can be hard with an irrational market inflating everything into fly-by-night territory

      • Re:Ugh (Score:5, Informative)

        by Brain-Fu ( 1274756 ) on Monday September 08, 2025 @10:54AM (#65646236) Homepage Journal

        The famous Trinity study gives a very good answer. It is based on a very thorough analysis of stock and bond investing over the history of the market, with the intent of finding the surest path.

        And it works like this: You invest a lot of money in successful stocks (like those in the SnP 500, so an SnP 500 index fund would be a sound choice). You are "ready to retire" when 4% of your investment's value is a bit more than you need in yearly income. That's when you retire. You sell off enough to claim your 4%. Then you live off of that for a year and let the market work for you. In theory, the investment will grow by more than 4%, to compensate. Next year, you sell off that same amount, adjusted up for inflation.

        Over almost every period in the history of the market, you can do this for 30 years, and at the end of 30 years you will still have most of your original investment. Over some periods, you would have even more. There was one period of sustained very high inflation where you would wind up running out of money.

        From related analysis I saw, if you mix in bonds, you wind up worse off. Bonds pay a fixed payout without losing principal, but they don't go up with inflation, so they wind up performing worse than the stock market over the 30 year period even if inflation is relatively normal. Some people still recommend having 25% in bonds to help smooth over the periods where the market is down, so you don't have to sell as much and don't get hit as hard. Do with that what you will.

        Of course, you also have the option of investing even more, so you don't need to take the 4% but can instead take 2% or whatever, to further ensure that you remain "gainfully retired" and can weather the storms.

        But when figuring out how much you need, consider that your medical expenses are likely to go up over time, because you will have to carry your own insurance but also you will have medical issues in your old age, and these will cost you more out-of-pocket money, even with insurance, than you have had to pay throughout your life.

        • Re:Ugh (Score:4, Informative)

          by Brain-Fu ( 1274756 ) on Monday September 08, 2025 @11:08AM (#65646272) Homepage Journal

          I meant to provide a link to info about the Trinity study [wikipedia.org]

        • * Past results do not guarantee future performance.

          I think the 4% is a good path given all that is known. However I do wonder if "this time is different" due to one thing - demographic decline. Global demographic slowing and decline is unprecedented in history, and seemingly could weaken demand for equities and decrease economic output on a "permanent" basis (i.e. until anybody reading this is dead). Though even in this case, the market is probably the best choice - sometimes there is no good choice so

        • Re:Ugh (Score:4, Informative)

          by fropenn ( 1116699 ) on Monday September 08, 2025 @01:25PM (#65646652)

          You are "ready to retire" when 4% of your investment's value is a bit more than you need in yearly income

          Health insurance for a family of 4, right now, runs about $20,000 per year. So 4%, you'd need $500,000 in investments just to cover that annually. Add in housing, which is at least another $1,500 per month, and now you need a portfolio of $950,000. Food is easily another $10,000 per year, plus transportation, probably another $10,000, and add in any entertainment, gifts, and pretty quickly you get to $75,000 - $80,000, which amounts to a portfolio of $2 million.

          If you deposited $1,000 per month (after fees, taxes, etc.), and earned 5% on that, it would take you 45 years to save up a $2 million portfolio. It's not bad advice, and starting early is key, but if you start at 25, 45 years gets you to 70, and most people would want to retire long before that.

          • If you deposited $1,000 per month (after fees, taxes, etc.), and earned 5% on that, it would take you 45 years to save up a $2 million portfolio. It's not bad advice, and starting early is key, but if you start at 25, 45 years gets you to 70, and most people would want to retire long before that.

            Correct. This is why I'm putting $4,000 per month into retirement savings, most of it into broad stock market index funds. The expected return on those is more in the 7% to 10% range, depending on how conservatively you're estimating.

            401k and Roth IRA plans help on the tax side.

          • Health insurance for a family of 4, right now, runs about $20,000 per year.

            I'm sure that's true for some family somewhere, but it's hardly true for all families of four. For our family of 3, we pay about $4000/year.

            So 4%, you'd need $500,000 in investments just to cover that annually.

            Besides which, virtually nobody retires as a family of four. A family of 2, or of 1, is the standard.

            • I'm sure that's true for some family somewhere, but it's hardly true for all families of four. For our family of 3, we pay about $4000/year

              You probably have a really terrible plan with extremely high deductible and high co-pays (or maybe it is highly subsidized by your employer(s)?). According to Blue Cross Blue Shield, average health insurance cost for a family of 4 was $1,438 per month, or $17,244 per year (https://www.anthem.com/individual-and-family/insurance-basics/health-insurance/cost-of-family-health-insurance).

              Besides which, virtually nobody retires as a family of four. A family of 2, or of 1, is the standard

              If you want to retire early, seeing as how many people don't have children until well into their 30's, you could very easily b

              • You probably have a really terrible plan with extremely high deductible and high co-pays

                You probably make some really incorrect guesses.

                My plan has a $0 deductible. It has a $0 out of pocket maximum. It has office copays of $10/$30/$40, depending on who you're seeing. You didn't mention it, but FWIW, the prescription drug coverage is also really good.

                I currently incur medical bills in excess of $1M/year, while paying virtually pennies out of pocket.

                (or maybe it is highly subsidized by your employer(s)?)

                That is correct.

                If you want to retire early, seeing as how many people don't have children until well into their 30's, you could very easily be on the hook for your child's health insurance until they turn 26...

                I may be wrong on this, as I've not kept up with the changing law, but I BELIEVE that although you MAY keep your child on your plan

                • That's great that you have a good insurance plan and that your employer picks up so much of it. My point is that, were you to retire, you would be paying much more than $4,000 per year for health insurance because currently your employer pays 80-ish % of it. So if you wanted to retire and maintain that same level of insurance coverage, it would require much more in annual spending (and probably even more than that, as some plans are age- and risk-based, once you get out of a group insurance, and they often

          • If you deposited $1,000 per month (after fees, taxes, etc.)....

            That's the slow boat to china.

            We've been putting in more like $3000/month. Add in the match, worth another $1700/month and it's almost $5K/month. China gets a lot closer that way.

          • Re: (Score:2)

            by DarkOx ( 621550 )

            your biggest expense healthcare there was 'for a family of four' if you are retiring, you should not generally have more then a single dependent, your spouse.

            o right away we can at least half that cost. We should be able to further reduce it by including medicare, you probably sitll want supplemental medical insurance, and likely a dental plan.

            Housing, again lots of people retiring that still have mortgage payment, that is probably a mistake unless it is for strategic reasons like you have a really good fi

            • I think most couples could/can retire comfortably on 1.2million, even today

              Hell, my parents retired 3 years ago with 200k in savings. They still haven't touched it and are living solely off of their social security.

              It all depends on what you want to do. Their house was paid off years ago, they cook all their meals at home, and rarely spend money on anything that isn't necessary. It just doesn't cost much to keep the lights on and food on the table.

        • The numbers have been revised a little, closer to 4.5%, and that's still super conservative (that's the amount of money you'd need to spend to survive the worst case scenario for 30 years). With 1.5 Mil in savings, you could safely withdraw $65K/year and be safe. The average of safety is closer to 7%, which means that you only need $1M to retire (yeah, with a bit more risk). Here's a really good article that explains it: https://www.fa-mag.com/news/ch... [fa-mag.com] And of course, there's also there's Bergen's book "A

          • The average of safety is closer to 7%, which means that you only need $1M to retire (yeah, with a bit more risk).

            We are sitting around $1.6M right now. I'll be dead in a few months, leaving my wife a rather rich window at 49 years old.

            My guess is that she will work until our child graduates from high school and then call it quits. That will put her at basically 59 years old, and with a stack of over $3M even if she never contributes another dime to retirement. More realistically, she will probably be closer to $5M, if she can avoid getting remarried and losing all her money to some asshole.

            • I'm sorry for your loss :( And that's always the risk of a low widthrawal rate, that you're leaving money (and enjoyment of it) on the table, of course, that's your choice, and depends on where you want the money you don't use to go, be it charities or family.

              • Well, I'm leaving a lot of it to my currently 9 year old child, in a trust. By my calculations, the trust should have at least $1M in it by the time he turns 18. Hopefully, he will be well situated to ride out the crazy future that's coming and able to withstand whatever "employment" looks like when he becomes an adult. That's the most I can do for him at this point.

                Hopefully, my wife will do a good job parenting him and give him the skills he needs to have. Unfortunately, I have real and serious doubts th

    • Re: (Score:2)

      by mysidia ( 191772 )

      And please don't tell me Bitcoin.
      I would say well-diversified portfolio that might include a small percentage assigned to a class of assets that Bitcoin is a member of.

      Also; In most cases if a stock offers a higher dividend - 8% is certainly higher than most dividend payers, then that indicates an opinion by the market that stock is at a higher risk, and the dividend may be less reliable long term. Especially if interest prices increase, than that value of capital invested into that dividend payer is m

    • There's no money to earn. The job market is horrifying. So you've got people in your fifties with a little money just trying to figure out what the hell they're going to do. That money isn't going to last forever.

      Are you going to pay for an unemployable 50-year-old to have a house and food and medicine? That's always the question, who's going to pay for it? Maybe they're being stupid but desperate people in bad situations don't make good decisions. This isn't the movies.
    • ha ha, yep, it's great until your assumptions are proven wrong.
      Yeah, sure, the stock market isn't in a bubble. I'll just ignore that for now... look at how much my portfolio has grown!!
      29% last year (true)
      WTF?
      I don't expect that I can see 30% compounded over very long.

    • Re:Ugh (Score:4, Informative)

      by RossCWilliams ( 5513152 ) on Monday September 08, 2025 @03:41PM (#65647038)
      The reality is we have a broken retirement system that depends on people investing. That guarantees their retirement is not going to be secure unless they save far more than they will need even if their investments tank. The fees they pay on those large investments support the finance industry and the finance industry funds campaigns. Its a cliche to say Social Security was never intended to be enough to retire on. But no one asks why it wasn't.

  • Microstrategy as benchmark? (Score:3)

    by jschultz410 ( 583092 ) on Monday September 08, 2025 @10:26AM (#65646160)

    Why on Earth is anyone comparing the performance of a dividend focused investment versus a Bitcoin meme, moonshot company?

    • Ah, I see. YieldMax's MSTY fund tries to give exposure to MicroStrategy's stock.

    • The summary makes it sound like dividends are bad. Dividends are not bad. Funds that use derivatives based on unstable companies or frothy assets are bad. Most (all?) of YieldMax's products are... dubious, at best.

  • Dividend investing is legit (Score:5, Insightful)

    by swillden ( 191260 ) <shawn-ds@willden.org> on Monday September 08, 2025 @10:31AM (#65646174) Journal

    In case the summary misleads anyone: Dividend investing is an absolutely legitimate strategy, indeed it's arguably the original stock investment strategy. The reason people bought shares in companies when the whole concept was invented was primarily to get paid a share of the companies' profits, i.e. dividends. Indeed, the way stocks have long been valued is assuming their price should be equal to the net present value of their future dividend stream (discounted for uncertainty). A few decades ago it became fashionable for companies not to pay dividends and instead re-invest profits in expansion or in stock buybacks, to increase the share price. That's fine, too, the point is that dividend investing isn't a new fad, it's really what stocks were always fundamentally about.

    Also, dividend investing has long been a staple of retirement planning... but it's generally a strategy for retirees not people saving for retirement. The benefit of buying good dividend stocks is that you can collect and live on the dividends without selling the stocks, meaning you live on the revenues without reducing your assets, so you don't run out of money before you die.

    For that matter, I suppose if young people have enough wealth that they can afford to buy enough dividend-paying shares (or shares in ETFs that invest in dividend-paying companies), then it's a fine strategy for retiring now. It just requires that you already have a few million. If you don't, well, you should invest in whatever will grow your money fastest, and that's "growth" stocks, not "income" stocks.

    As an aside, I'll mention that there's also a common One Weird Trick scam [*] related to dividend investing: Dividend capture. The idea is that you buy a stock just before it issues its dividend to capture the dividend, then sell it. Rinse, repeat. Of course, anyone who actually tries this quickly learns that dividends are priced into stocks (net present value of future dividend stream, right?) which means that the share price drops by roughly the amount of the dividend when the dividend is issued, so selling right after the dividend generally means giving up the gain. At the end of the day, and after trading commissions, you're likely to be better off doing the boring thing of buying and holding shares of profitable, well-managed companies.

    [*] The scam is that the scammer sells you books / seminars / etc. to teach you how to do this marvelous, clever thing that doesn't work.

    • The issue isn't really chasing dividend yielding investments.

      The problem is young people believing that you can live off (i.e. - consume) those dividends and still end up okay in the end.

      If you don't reinvest your dividends -- especially if you are investing in high dividend yielding investments -- then your total return on investment, and therefore net worth, is going to suffer badly.

      • The issue isn't really chasing dividend yielding investments.

        The problem is young people believing that you can live off (i.e. - consume) those dividends and still end up okay in the end.

        If you don't reinvest your dividends -- especially if you are investing in high dividend yielding investments -- then your total return on investment, and therefore net worth, is going to suffer badly.

        Sure, and if you're a retiree not looking to grow your net worth but just live well on what you already earned, that's fine. It's income investing. If you're looking for growth so that later in life you can retire and live well on what you've already earned, it's a bad idea.

      • And indeed, a lot of the "financial influencers" pushing this shit are advocating for extremely high yield (in some cases 20 percent or more) funds that erode their NAV rapidly.

    • Re: (Score:3)

      by coop247 ( 974899 )
      Agree with this analysis. Not enough focus on taxes in the article, it's mentioned but in a hand wavy way.

      There are some bond funds that do this exact dividend farming but are tax exempt. I'm in a high tax bracket, these dividend ETF's are being taxed at my income bracket, not long term investment, reducing the yield significantly. I have a good chunk in a state specific vanguard bond fund that is exempt from both federal and state tax. Lower yield, but not taxed. Lots of ways of going about this.

      • Agree with this analysis. Not enough focus on taxes in the article, it's mentioned but in a hand wavy way. There are some bond funds that do this exact dividend farming but are tax exempt. I'm in a high tax bracket, these dividend ETF's are being taxed at my income bracket, not long term investment, reducing the yield significantly. I have a good chunk in a state specific vanguard bond fund that is exempt from both federal and state tax. Lower yield, but not taxed. Lots of ways of going about this.

        Good point: taxes are a very important issue if you're trying to dividend farm. If you haven't held the stock for long enough (about two months, though the rules are complicated) before the dividend is issued, the dividends are taxed as income (up to 37%, plus state income taxes). If you have held the stock long enough, they're taxed as capital gains (15%, plus whatever the state takes). And of course, if you can get tax-exempt, that's 0%.

        This points out that I should probably investigate whether I can

    • Re: (Score:2)

      by mysidia ( 191772 )

      The benefit of buying good dividend stocks is that you can collect and live on the dividends without selling the stocks, meaning you live on the revenues without reducing your assets, so you don't run out of money before you die.

      For a personal account.. this is mainly a tax benefit. The qualified dividends have a reduced tax rate, and for ordinary dividends on normal stocks you don't get taxed on the appreciated shares of stock; only the dividend amount.

      For example holding period 80 years.. You might w

      • There are brokerages that allow you to buy and sell fractional shares now, sometimes called "slices". Obviously you can't actually sell a tenth of a share to another investor, but the brokerages handle the bundling and unbundling and retain the fractional differences themselves.

        • Re: (Score:2)

          by mysidia ( 191772 )

          There are brokerages that allow you to buy and sell fractional shares now, sometimes called "slices".

          Yes. However it just means the brokerage itself is holding a share and assigning different customers portions of it.

          What they really need are stocks with an "On/Off" switch for receive dividends that set to Off by default and do not pay any dividends, but increases in Market price per share by amount that would have been a dividend -- without a taxable event instead. And when set to On, yield a dividen

    • Re: (Score:2)

      by TWX ( 665546 )

      What I find kind of funny in all this, is that normally one would think that the company that pays dividends would be more likely to be the fly-by-night company that is only concerned about the quarterly or annual results, while the company whose investors profit by holding and then selling shares would be the long-term company whose outlook and efforts would extend into the far future, but it seems like in practice this has been the other way around. It seems like the more stable companies pay dividends,

      • What I find kind of funny in all this, is that normally one would think that the company that pays dividends would be more likely to be the fly-by-night company that is only concerned about the quarterly or annual results, while the company whose investors profit by holding and then selling shares would be the long-term company whose outlook and efforts would extend into the far future, but it seems like in practice this has been the other way around. It seems like the more stable companies pay dividends, even if just small ones, while pump-and-dump seems to occur more when trading is required.

        A lot of it is because older companies pay dividends, in part because they're old enough that their history goes back to when every profitable publicly-traded company paid dividends. Some new companies held off on paying dividends while they reinvested profits to establish themselves, and some established companies temporarily decided to cut their dividends (sometimes to zero) if they had a massive growth opportunity and needed to aggressively reinvest, but the idea that a company might plan never to pay d

  • "The New Amercian Hustle" (Score:5, Insightful)

    by PuddleBoy ( 544111 ) on Monday September 08, 2025 @10:32AM (#65646178)

    If it were a real hustle - effort going into creating value - then call it a hustle.

    But this is just another case of people looking for 'something for nothing' and avoiding a real hustle.

    It's not that most of us don't share a desire to have an easier life (financially). But, except for a very few, the rest of us have to work. It's dangerous (for society as a whole) if groups of people start to feel like working for a living is 'optional'. What kind of mindset does that create/reflect? You put yourself at a disadvantage compared to those (at home or abroad) who are willing to put in the effort. You'll pay for it eventually...

    • Re:"The New Amercian Hustle" (Score:5, Insightful)

      by znrt ( 2424692 ) on Monday September 08, 2025 @11:00AM (#65646254)

      But this is just another case of people looking for 'something for nothing' and avoiding a real hustle.

      it's worse than that. dividends create profit, not value. employment creates value, actuall stuff and services. in a cvilization that is already heavily finiancialized and has declining capacity of generating value, we are advising young people to forgo employment in favor of even more financialization. this is not just another scam, it is suicidal level of stupidity.

      then we wonder why the west is going bust ...

      • I think you've solved the mystery behind plateauing per-capita productivity. We have a society where people are racing to see who can do the least amount of useful work. Where uselessness and incompetence aren't just tolerated, but celebrated.

    • They still have to work. They must come up with the cash to invest somehow.

      I can't read the full article as it is paywalled. However it offers quotes about people who don't want to wait until they are 65 to retire, so they are looking for ways to retire early. And there is an implication that some people are just eating into their retirement money for things like buying a house, so it is more of a "facilitate a better life now than hold it all until retirement."

      So it's not a "something for nothing" situa

      • Maybe young people just don't have the facts. Or maybe they think they have found a way to beat the system. Either way, they are wrong.

        I think it's mostly a matter of overgeneralizing from the recent past.

      • Re: (Score:2)

        by mysidia ( 191772 )

        problem is, they DO eat into NAV, and this strategy won't survive periods of high inflation and/or down markets.

        Well we have been in and are likely going into a period of high inflation. They are assuming a very high risk buying into 8% payers - a bit of an interest bump has the chance to devalue principle and cause dividends to be slashed as well. Might even have bankruptcies if they're into real-estate investors swapping mortgages around. Depending on which funds and what type of issuers exactly t

    • We don't think working for a living is optional, people are thinking it's impossible. That no matter how hard you work you can't make a living.

      Folks I think just don't realize how bad it is out there. Especially if you're over 50 and unemployed.

      And like I mentioned on another comment desperate people don't make good decisions. We wouldn't be in this mess if they did

    • Re: (Score:2)

      by mysidia ( 191772 )

      But this is just another case of people looking for 'something for nothing' and avoiding a real hustle.

      It is not something for nothing. It is something for your money. A capital investment.

      Capital investment is good; provided you are making good investments. It's not good if you are going into debt or servicing debt at a interest rate near equal or greater than the expected annual growth in value of your investments, however.

      • "It is not something for nothing. It is something for your money. A capital investment."

        Quite right. Sorry, I didn't mean it literally. It was more along the lines of whether they could find a way to not expend effort.

        Now that could be because the job market sucks. There's a limit to what you can do there.

        But there was the hint that they were looking for a means to replace labor with just investment. Which works when you start off with a lot of money, but kinda falls flat if you have little to start with.

  • Dividens are taxed as ordinary income (Score:4, Insightful)

    by madbrain ( 11432 ) on Monday September 08, 2025 @10:32AM (#65646182) Homepage Journal

    Whereas capital gains aren't. In a taxable account, you are better off investing in something that doesn't throw a lot of dividends. You'll pay lower tax rates, and get less expensive healthcare, if you aren't already getting it through employment.

    • Re:Dividens are taxed as ordinary income (Score:5, Informative)

      by tempo36 ( 2382592 ) on Monday September 08, 2025 @11:37AM (#65646354)

      Dividends are not taxed as regular income. If the dividend is considered a Qualified Dividend, which it often is (in my whole portfolio, I have no Unqualified dividend stocks), it is taxed at a 15% rate as long as your income is between $48k-533k and 0% if below $48k and 20% if above $533k (for unmarried single filers...feel free to pull up the numbers yourself for married filing jointly etc).

      Which is to say that they're nearly identical to long term capital gains for many/most filers.

      (Ok, here you go...I'll just put this here for folks: https://www.nerdwallet.com/art... [nerdwallet.com] )

      • Re: (Score:3)

        by madbrain ( 11432 )

        Many dividends are not qualified. I am early retired, and have a fair amount of spending money in money market accounts. The dividends they throw are not qualified.

        Some of my long-held ETFs also throw non-qualified dividends, even index funds. Trading them for funds that throw only qualified dividends would mean realizing capital gains that would cost me a bundle in healthcare subsidies.

        • I suppose it's simply reasonable to say "verify your own holdings". For myself, out of $8,000 in dividends, $20 are unqualified. This is particularly true if you have most of your money in money markets or ETF/Mutual Funds because part of the qualification for Qualified Dividends is the holding duration of the individual security. If a Mutual Fund or ETF is rebalancing or restructuring this is going to trigger capital gains and make some of the dividends unqualified. Similarly, some money markets pay their

      • Re: (Score:2)

        by madbrain ( 11432 )

        The other point is that dividends add to your AGI/MAGI, while unrealized capital gains do not. It's harder to control your income with dividends as you can't predict when they will be paid and how much exactly. Some government programs have income cliffs - Medicaid, ACA, or OA-HIPP in my case which is at 600% FPL, and exceeding it by $1 can mean having to pay an extra $30k/year in premiums and copays. Those cliffs and the penalties that come with exceeding them are a form of tax, IMO.

      • There's a third category of dividend that everybody seems to forget about: tax-free dividends. These usually come from stocks that are based on state and municipal bonds. I guess nobody talks about this because the the yields are lower (the horror!!), but again, aren't taxed. If you aren't yield-crazy or in a hurry, and just want an unsexy dividend stock, then just park your money in a tax-free muni bond stock and let it DRIP its way to greater wealth over the years. I know of one tax-free muni bond stock t

    • This is not true. Qualified dividends [investopedia.com] are taxed as capital gains.

  • Invest into whatever some people recommended. Lose your money slowly and in obscure ways.

    The truth is that unless you have a lot of money to invest (10's of millions or more), you will only get bad financial advice. Hence the one thing you can do is become an expert yourself. If you are smart enough, have the education and the intuition. But even then you need luck, real seed-money and the profits will not be that great.

    • Re: (Score:2)

      by Jeremi ( 14640 )

      The truth is that unless you have a lot of money to invest (10's of millions or more), you will only get bad financial advice. Hence the one thing you can do is become an expert yourself.

      That reminds me of the Mark Twain quote: "Good judgement is the result of experience, and experience is the result of bad judgement".

      i.e. you certainly can become an expert yourself, eventually, but you'll probably make some sub-optimal financial decisions in the process.

  • Bollocks (Score:3, Interesting)

    by karmawarrior ( 311177 ) on Monday September 08, 2025 @10:46AM (#65646218) Journal

    > Speaking to Bloomberg, finance professor Samuel Hartzmark identified this as the "free dividends fallacy," where investors fail to recognize that dividends reduce share prices rather than creating additional wealth.

    Leaving aside whether the quote is irrelevant - the implication of TFA is that people are using this as side income because wages are low (though I think, also, the article is bollocks too, people who need the income don't have loose change to spend on shares), this is the "free dividends fallacy fallacy", which relies upon the ludicrous assertion that stocks are valued logically according to some objective criteria.

    In a perfect world, yes, a company giving 1% of its income to investors rather than investing it back into itself should reduce its worth... kinda. But the share price of a company is based upon the desirability of the stock. Will the business still exist in ten years? Will it be bigger? Does it have a racist asswipe who spends all day posting memes to a nazi social network as its head? (You'd think that'd kill the company's value, especially if said company only exists due to government subsidies and said company has a recent history of technological failures, but, I'M PROVING MY POINT HERE. You think Tesla would lose any of its share value if it paid a dividend next year? Fuck that, it'd probably go up in value as there'd be a reason to buy it.)

    Dividends are also a means for stable businesses that have no obvious direction to grow, but no obvious threats that require a reorganization, to reward investors. That keeps the share price high.

    So not only is Hartzmark's comments irrelevant, they're also predicated on the most common fallacy in stock trading - the idea that stocks have an objective value. People who assume that are usually the people who end up holding the bag when an investment goes south.

    • this is the "free dividends fallacy fallacy", which relies upon the ludicrous assertion that stocks are valued logically according to some objective criteria

      Actually it relies on the assumption that stocks are not valued logically. If dividend stocks were valued logically, their share price would be equal to the net present value of the future dividend stream. As a dividend date approaches, the NPV-based discounting of that dividend approaches zero, which means the value of the dividend is just added into the share price, and the day after the dividend date the share price will drop by that dividend value. In other words, there is no benefit to buying a stoc

  • Not tax efficient (Score:3)

    by dskoll ( 99328 ) on Monday September 08, 2025 @11:19AM (#65646294) Homepage

    Dividends are not as tax efficient (at least in Canada) as just investing in a stock and letting it grow over time. Dividends are taxed as income, whereas growth in stocks is taxed more favourably as a capital gain.

    Furthermore, there is no rational basis [pwlcapital.com] for choosing a dividend stock over a non-dividend stock.

    • In the US it depends on the nature of the dividend, but the majority are a Qualified Dividend and are taxed at a favorable rate similar to long term capital gains.

      • Re: (Score:2)

        by dskoll ( 99328 )

        We have a similar thing here ("Eligible" vs "Non-Eligible" dividends). Dividend income is taxed more favourably than employment income, but less favourably than capital gains income in Canada, AFAIK.

    • "Furthermore, there is no rational basis for choosing a dividend stock over a non-dividend stock."

      That is so amazingly false. Dividends pay out every year or possibly every quarter. You can only sell a share of stock once.

      • Re: (Score:2)

        by dskoll ( 99328 )

        Did you read the article I linked to and the studies it linked to?

        I did not think so.

        • I've been reading this stuff for years.

          Neither you nor they answer the question of "when you've sold your last share, what do you do for groceries next month".

    • Dividends are not taxed as income in Canada, because there's a tax credit on eligible dividends (BMO explanation [bmo.com] I found on Google). Depending on your tax bracket I think you may be better (or worse) off with dividends vs. capital gain, but in either case it's much better than income.

      • Re: (Score:2)

        by dskoll ( 99328 )

        Dividends in Canada are taxed more favourably than employment and other income, but less favourably than capital gains.

        The big difference between dividends and capital gains is that if you have dividend income, you have no control over when you receive it. With capital gains, you can choose when and how much to sell, and can therefore take only the income you actually need and at times that are most tax-favourable.

        • Go to that link from BMO and read it. Turns out dividends can be taxed less than capital gains.

          As for the timing of dividends vs. capital gain, yeah that's fair. In practice though.. the timing matters most when you're working (i.e. defer everything when you're drawing a big salary, hence not having a huge dividend portfolio for younger folks). If you're retired, it's less relevant, you get dividends or need to sell a certain amount each year / month.

    • Re: (Score:2)

      by mysidia ( 191772 )

      Dividends are taxed as income, whereas growth in stocks is taxed more favourably as a capital gain.

      In the US Dividends are taxed at a reduced rate similar to capital gains.

      Which is better depends on your goals. In some cases Dividends will be more favorable, so long as they are qualified dividends. Dividends would never be a tax disadvantage if the US would create an option to take reinvested Dividends as a reduction in tax basis or additional total for capital gains to be taxed on sale.

      For accumulati

  • this is not new, and sadly only applies for the small percentage of people who can afford to save for retirement after housing, healthcare, and other costs

  • ...for Ponzi schemes.

  • Companies that pay dividends tend to be bigger well established mature companies that have a large market share and aren't investing much in growth, which means they tend to hold value pretty well in a crash. They also tend to fare a little better in periods of high inflation, and we're going to see higher inflation for the foreseeable future. But you aren't going to average better than a 5% market return, and that requires a million dollars in assets to get that rather small $50,000 per year income.
  • To make money off dividends you have to have a lot more money than it takes to live

  • GenZ Needs Money to Make Money (Like This) (Score:5, Insightful)

    by eepok ( 545733 ) on Monday September 08, 2025 @01:29PM (#65646668) Homepage

    This is a standard Bloomberg "check out how easy it is to get money once you already have money" article. Clickbait at its core.

    a 26-year old former real estate analyst

    At 26 years old, most people don't have the experience to call themselves "a former" anything.

    who has put his savings into a dividend-focused portfolio

    Exceedingly few self-supporting 26 year olds have enough money in an account to call "savings".

    from which he withdrew $40,000 to contribute to the down payment on his home in Tennessee.

    That means that he had OVER $40,000 in cash savings to put into that portfolio at the age of 26. The median HOUSEHOLD has $8,000 in savings.

    Let's take a look at another profile:

    Bell, who is 35, left his job at a Wall Street bank in 2022. He took a position at a more flexible firm that allows him to work from home and develop his YouTube channel, “Live with Dividends NOW!”

    Oh... so he had a very high paying job for an extended period of time, now has insider information, and is now telling people they can make magic easy money by buying his stuff and doing something different?...

  • It can be done, but you gotta have $$$ (Score:3)

    by doubledown00 ( 2767069 ) on Monday September 08, 2025 @01:45PM (#65646726)

    Yes, living off dividends day to day can be done. I'm semi-retired at 47 and doing it now. However to make it happen there is an important piece of the puzzle that these folks miss: You have to have a lot of cheese saved first. As a very rough rule of thumb, you can get $1,000 in dividends a month from evern $100,000 invested. Now keep in mind a yield like that will most likely sap your portfolio of any fund growth because it's all going out the door as cash.

    I don't know that most of the young people trying to follow these influencers has anywhere near 100k saved. And if they do they'd be dumb to put the whole nut in a dividend play and not diversify. The solution for these brokeass dividend wannabees then is to chase even bigger yields which over time will erode their principal.

    The only tried and true solution is time in the market long term. I have around 2 mil saved and am getting 18 - 20k a month in dividends. It can be done but for me it took decades to get here.

  • Sounds like a bunch of people who don't understand dividend equivalence. If a company has 100 shares worth $1 and makes $10 of income, it's now worth $110. If it distributes $10 to its shareholders, it's worth $100 and the shareholders have $10. The idea of "not wanting to sell shares" is just cognitive bias. What matters is how much of your portfolio you withdraw (via dividends or sales) vs the total return on the portfolio.

    Now, we can recognize that the market is not fully efficient and a $10 dividend may

  • You've got to have money to invest in sufficient quantities to skip your day job and rely on investment income. People who have day jobs don't have that kind of money stockpile, and people who do have that kind of stockpile, already don't need day jobs.

  • Any investment that has a high rate of return, also carries a high risk. The higher the return, the higher the risk. This principle isn't nullified by dividend-focused ETFs. Yeah, it might be a fun ride for a while, until the big crash at the end of the ride.

  • It's become official (Score:3)

    by Chris Mattern ( 191822 ) on Monday September 08, 2025 @02:49PM (#65646898)

    2029 will be the new 1929.

  • In this sense: it is really a full-time job to invest with skill and knowledge and if you hit a big bet it can make your daytime work seem like a waste of time, you can make more doing investing full time. We are talking moving well past buy and hold mutual funds into complex things like individual stock research, currency trades, commodities and options.
  • Is something still a hustle when there's an element of gambling? And is it still a hustle when you need a large amount of capital to make relatively modest gains? Hustle culture is defined by 'the grind' - long hours, multiple jobs etc. it's not just piling tens of thousands of dollars into a trading account

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