Dividend strategy: falling prices may still come with opportunities

Dividend strategy: falling prices may still come with opportunities
Dividend strategy: falling prices may still come with opportunities
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“Change is the only constant in life”, said the Greek philosopher Heraclitus of Ephesus (535 – 475 BC) hundreds of years ago. Or, a more contemporary quote could be : “Nothing is as constant as change.” And that is also true for the equity market. Every price increase is followed by a market correction.

Often, such corrections are perceived as “bad”, as they curb the gains achieved so far or even result in losses. But don’t such price declines also offer opportunities?

In this article, we want to discuss the opportunities and risks of investments in dividend shares that arise from major falls in price and present an entry strategy for this market segment. 

The equity market fluctuates – constantly

In order to make the fluctuations of the global equity market tangible, it makes sense to look at a longer time series.

dividend strategy 30 years of global stock market
Chart: MSCI World (incl. Net-Dividends)
Source: Refinitiv Datastream, Display period: 30 years, Data as of 18/10/2022
Note: Past performance is not a reliable indicator for future performance of an investment.

The long-term chart illustrates two aspects very clearly:

  • Major slumps occur regularly
  • In the long term, these price declines have been recovered

Of course, it is not possible to directly derive a course of action for the future from historical price data. However, for those who believe in the future of the companies in question and thus in the equity market, downturns represent opportunities to buy high-quality shares.

What are high-quality companies?

During crises, investors often prefer companies with a proven business model that can generate profits even in difficult times. Such companies can also pay attractive dividends in difficult market phases.

However, it should always be borne in mind that any company can get into difficulties during a crisis. It therefore makes sense to diversify the investment e.g. across sectors and countries.  This is the case for dividend equity funds.

When is the right time to invest?

It is advisable to only invest in equities if one assumes that the planned investment can survive difficult times. A crisis usually leads to a decline in share prices. So, what could be more obvious than to use significant corrections on the equity markets to build up positions? Catching the lowest price during a correction would be a matter of pure luck. Also, many investors easily lose the courage to buy into a falling market.

If pure luck is not your friend, you need a pre-defined entry strategy. This should answer the following questions:

  • What investment (target)?
  • What amount?
  • How far should prices come down for you to invest?
  • How should the investment be made (one-off investment or repeated, smaller amounts)?

A possible entry strategy

As mentioned earlier, the duration and extent of price corrections cannot be predicted. In the literature, a fall in share prices of 20% or more is referred to as a bear market. Assuming that every bear market ends at some point, a possible strategy would be the following one:

  • Split the total investment amount into twelve tranches
  • Invest monthly over the following twelve months
  • Initiate purchases at the outset of the bear market once prices have decreased by 20% from the peak

While such a gradual entry strategy will not result in the absolute low in terms of entry (which would theoretically be possible with a one-off payment), at least part of the capital is invested at lower prices.

Why choose dividend equity funds?

We only know the duration and extent of a market correction at hindsight. If it were to last longer than expected, investments with regular payouts would at least provide an incentive to hold out in difficult times.

A dividend equity fund offers some essential aspects in this context:

  • Selected companies with a stable business model
  • Regular income in the form of dividends means regular income in the fund
  • Broad diversification

ERSTE RESPONSIBLE STOCK DIVIDEND is an investment opportunity worth taking into consideration here. For more information on the fund and ways of investing, please refer to the fact sheet and the legal documents of ERSTE RESPONSIBLE STOCK DIVIDEND or visit an investment advisor at any branch office of Erste Bank or Sparkassen in Austria.


For investors with a defined investment strategy, falling prices in the market can also offer opportunities. Dividend equity funds with a broad diversification can be a viable investment option in phases of an extended market correction. However, one should be aware that every type of investment entails risks. Investors should therefore be conscious of said risks and have a correspondingly long-term investment horizon.


The fund employs an active investment policy and is not oriented towards a benchmark. The assets are selected on a discretionary basis and the scope of discretion of the management company is not limited.

For further information on the sustainable focus of ERSTE RESPONSIBLE STOCK DIVIDEND as well as on the disclosures in accordance with the Disclosure Regulation (Regulation (EU) 2019/2088) and the Taxonomy Regulation (Regulation (EU) 2020/852), please refer to the current Prospectus, section 12 and the Annex “Sustainability Principles”. In deciding to invest in ERSTE RESPONSIBLE STOCK DIVIDEND, consideration should be given to any characteristics or objectives of the ERSTE RESPONSIBLE STOCK DIVIDEND as described in the Fund Documents.

For a glossary of technical terms, please visit this link: Fund Glossary | Erste Asset Management

Legal note:

Prognoses are no reliable indicator for future performance.


Legal disclaimer

This document is an advertisement. Unless indicated otherwise, source: Erste Asset Management GmbH. Our languages of communication are German and English.

The prospectus for UCITS (including any amendments) is published in accordance with the provisions of the InvFG 2011 in the currently amended version. Information for Investors pursuant to § 21 AIFMG is prepared for the alternative investment funds (AIF) administered by Erste Asset Management GmbH pursuant to the provisions of the AIFMG in connection with the InvFG 2011. The fund prospectus, Information for Investors pursuant to § 21 AIFMG, and the Key Information Document can be viewed in their latest versions at the web site www.erste-am.com within the section mandatory publications or obtained in their latest versions free of charge from the domicile of the management company and the domicile of the custodian bank. The exact date of the most recent publication of the fund prospectus, the languages in which the Key Information Document is available, and any additional locations where the documents can be obtained can be viewed on the web site www.erste-am.com. A summary of investor rights is available in German and English on the website www.erste-am.com/investor-rights as well as at the domicile of the management company.

The management company can decide to revoke the arrangements it has made for the distribution of unit certificates abroad, taking into account the regulatory requirements.

Detailed information on the risks potentially associated with the investment can be found in the fund prospectus or Information for investors pursuant to § 21 AIFMG of the respective fund. If the fund currency is a currency other than the investor's home currency, changes in the corresponding exchange rate may have a positive or negative impact on the value of his investment and the amount of the costs incurred in the fund - converted into his home currency.

This document serves as additional information for our investors and is based on the knowledge of the staff responsible for preparing it at the time of preparation. Our analyses and conclusions are general in nature and do not take into account the individual needs of our investors in terms of earnings, taxation, and risk appetite. Past performance is not a reliable indicator of the future performance of a fund.

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