3 Things To Do With Your MPF Account Right Now

According to the latest MPFA figures*, its members strongly prefer investing in stocks. Some 43% of all MPF accrued benefits are invested in equities, and 37% in mixed equity-bond funds–80% of the total. Non-equity investments like bonds and money market funds constitute the remaining 20%.

This is not surprising, given Hong Kong people’s longstanding love affair with stock investment. However, with the Hong Kong market in a bearish state and global markets increasingly volatile, it’s important to assess how your current MPF investment allocation will ride out this period of increased uncertainty. You can start by taking these three actions.

1.    Check your risk exposure

In bearish times, you should have some idea about how much downside risk you’ll potentially face.

There are many ways to measure risk.  The one mandated by MPFA in its Code of Disclosure is “the annualized standard deviation of the monthly rates of return of a fund over the past 3 years.” This “Fund Risk Indicator” is expressed in percentage, which is how much the fund price moves up or down from its mean in the past three years. The larger the number, the more volatile and riskier the fund is.

When the indicator is 5% or below, the fund is considered low-risk.  10% or above is high risk, anything in between is medium risk. Remember that in a bear market, the downside risk is usually greater.  If all or most or your funds are high-risk, your losses will likely be higher.  You can find the updated Fund Risk Indicator of all MPF funds on the MPF official website.

If all these sounds a bit too complicated, consider using the following simpler but equally meaningful way to gauge your risk exposure. The conventional asset allocation method suggests that the proportion of your portfolio devoted to stocksshould decrease with age. If you are 40 years old, 70% of your assets should be in stocks, and 30% in bonds.  If you are 50 years old, 60% of your assets should be in stock, and so on. All you need to do is to calculate the proportion of your holdings vested in equity and check it against this rule of thumb.

Whichever method you use, ensure that you are clear about your risk exposure. It’s ok to take risks as long as they’re calculated. After all, no risk means no return How much risk you should takeis a matter of your investment experience, financial knowledge, and temperament. Age is another factor. The farther you are from retirement, the more risks you can afford to take.

2.    Check the fees

The public complains incessantly about fund fees.  On average, they have come down through the years, but they do differ across funds. Some funds charge up to 3%.  Remember that you’ll have to pay these fees even if a fund generates a negative return.

3.    Check if re-balancing is necessary

Suppose that after reviewing your portfolio, you’d like to change your current allocation or fund selection.  At this point, you can do a “switching.” Start by checking your trustee’s website for fund selection, information, and performance updates. Select funds that are appropriate for your needs, then simulate the revised portfolio. This is an important step, and one that deserves your time. If you are new to investing, it’s time to do some homework!

After you’ve made your selection, you can proceed to the actual switching. All trustees provide online switching services. You have a choice to switch funds for your accrued benefits and/or future contributions.  This important feature allows you to lock in any profits you’ve made on the accrued benefits, and use the future contributions to stay invested.  Also note the terms and conditions around fund switching.  For instance, some funds do not allow more than one switching-out peryear.

Once you’ve finished those steps, you’re done! Just make sure you review your account at least once every six months.

Currently, the average balance of an MPF account is HK$197,000*.  And 3% of all MPF accounts carry a balance of over HK$500,000.  No matter what your current balance is, every dollar is hard-earned money that deserves as much attention as your stock portfolio. Take steps to safeguard it before the market gets too bumpy.

*Remarks: “MPFA” is Mandatory Provident Fund Schemes Authority. Data from their September 2018 report.


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