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MPF Decoder for the Youth
Chapter 3: MPF Investment Journey
Max: Wow! Thank you! It's easy to see from your calculations that my "MPF Life" had better begin right away so as to make the best use of "youth", the best capital that I possess. But then...what do I have to do?
MPF Elf: OK, let me explain! During the course of your long "MPF Life", you will go on your own MPF investment journey, using your contributions to make fund investments which will be rolled over until you retire. And you will make various decisions at different life stages. Basically these can be categorized into the six major decision points...
Max: So how should I select a fund?
MPF Elf: To help you understand how to choose a fund, first let me introduce you to the spokespersons of the MPF funds, the members of the "JJ Five" Band. Each band member represents a major MPF fund type. They will help you recognize the main characteristics of each MPF fund and how to choose the fund most suitable to your needs! In general, funds with higher returns come with higher risks, and funds with lower returns come with lower risks.
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Slogan
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Earning interest very slowly |
Understand the terms and conditions for guaranteed returns
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Looking for steady returns |
Proportion of stocks and bonds determines the risk level
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High potential returns come with high risk
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Risk Level
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Relatively low |
Relatively low (but it also depends on the qualifying conditions)
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Low to medium |
Medium to high |
Relatively high |
| Suitable For |
Conservative, potentially more risk averse scheme members, or those who are about to retire
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Risk averse scheme members, those close to retirement, and those willing to abide by the qualifying conditions until retirement
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Moderately conservative scheme members with low risk appetite, and those seeking stable returns over the medium-to-long term
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Scheme members who may adjust the proportion of stocks and bonds in their portfolio at different life stages
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Young scheme members with a longer investment period and a higher risk tolerance level, as well as risk tolerant scheme members
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MPF Elf: You also need to assess your own risk tolerance level. You should consider the following factors:
- Investment horizon (long or short)
- Investment appetite (usually depends on factors such as an individual's personality, past investment experience and investment objectives)
- Other savings or investments made for retirement
At the same time, you should study the fund information provided by your trustee (such as fund fact sheets and annual benefit statements) and the "Fee Comparative Platform" (http://cplatform.mpfa.org.hk) on the MPFA website, as well as other relevant information on the site.
On top of that, MPF investments adopt the "Dollar Cost Averaging" strategy. This means you invest a fixed amount of money in an MPF fund at the prevailing market price. When the fund price goes up, you will buy a relatively smaller number of fund units. On the other hand, when the fund price drops, the same dollar investment buys relatively more fund units. In this way you need not predict the market movement. After a period of time, the price of fund units you purchase will be averaged out and, over the longer term, you will mitigate the impact of short-term market fluctuations.
Max: I have never invested before. How should I select an MPF scheme?
MPF Elf: An employee must select an MPF fund scheme under the following circumstances: When...
- the employer has enrolled in two or more schemes
- the employee wishes to make special voluntary contributions
- handling the accrued benefits (i.e. accumulated contributions plus investment returns) after termination of employment
When choosing an MPF scheme you must consider the following three equally important factors:
- Range and quality of services of trustees and their service provider
- Choices and suitability of the funds
- Fees and charges
Some scheme members may consider the fund performance of the scheme, but please note that a fund's past performance is not indicative of its future performance.
Max: I still have a long way to go before retirement. So how can I estimate now whether my savings will be sufficient for my retirement needs? Should I make voluntary contributions?
MPF Elf: First you should assess your own retirement needs, and estimate your future savings (including MPF and any other savings or investments) upon retirement to see if there is any saving gap. Then you need to decide whether to make additional voluntary contributions or other savings and investments. You can make use of the "MPF Calculators" on the MPFA website to estimate your retirement needs and the expected value of your MPF accrued benefits at retirement.
Max: I get it! But how can I manage my MPF account if I change employer?
MPF Elf: Well, Max, this is a quite common occurrence. When you change employer, you can use one of the following methods to handle the accrued benefits from your previous job:
- Open a preserved account in another scheme of your own choice for continuous investment *
- Open a preserved account in the original scheme for continuous investment
- Transfer to your contribution account in the scheme chosen by your new employer *
A preserved account is an account in which your accrued benefits in respect of your former employment or self-employment are held. New contributions are generally not accepted. Since your trustees will continue your former investment of accrued benefits in accordance with your instructions, fees and charges will still be incurred.
(* Note: If your original MPF portfolio included guaranteed funds, it is possible that when the accrued benefits are transferred, you may not fulfil the fund's terms and conditions (such as the minimum investment period requirement) and thus be unable to get the guaranteed returns. So it's essential to review the relevant terms and conditions prior to the transfer.)
MPF is a long-term investment during the course of which we will all go through different life stages...
Max: So when and how should I adjust my MPF fund choices?
MPF Elf: That's a very good question! During the course of the MPF investment journey, you will pass through different life stages (such as changing job, purchasing property, getting married, having children and finally retirement). For that reason, regularly reviewing your MPF investment will ensure that you keep moving towards your individual investment objectives.
This review is normally made on a half-yearly or annual basis, and enables you to see whether your MPF investment is in line with your investment objectives, preferred asset allocation, as well as your individual risk tolerance level. In addition, when adjusting your fund choices, you should:
- avoid redeeming a fund because of short-term price fluctuations
- be aware of the number of fund switches allowed for each scheme
- clearly understand the terms and conditions of the individual funds, especially those of guaranteed funds
Whenever you review your fund choices, always refer to the annual benefit statements and fund fact sheets provided by your trustee.
Max: When I do retire, how do I manage my MPF accrued benefits?
MPF Elf: It's up to you! When you retire you could withdraw your accrued benefits in a lump sum, or keep them in your MPF account for rollover and continuous investment.
Congratulations! You now have an overview of your entire MPF investment journey. It's time for you to make proper preparations for your future retirement with prudent investments!
Max: Now I have a really good idea of how the entire MPF investment journey works. If I need further information on contributions in the future, what should I do?
MPF Elf: Well, you should check regularly the monthly pay records provided by your employer. You can also get updated information on your MPF account through different channels provided by your trustee, such as hotline, website, Automatic Teller Machine (ATM) or customer service centre etc. Also, you can use the MPF "Contribution Enquiry Line" at 183 3030 and you will be linked to your trustee to help you check your employer's contribution status over the last three months.
Max: I get it! Let me start my prosperous MPF Life today!
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