Four simple steps in managing your MPF Investments

With the full range of fund choices available to you, it can be difficult and time consuming to allocate your pension investment efficiently. Want a quick and easy way to manage your MPF, ORSO or Macau Pension funds and stay up to date on fund performance? The below four steps will help you.

One big step towards your retirement goal

Whether you are a member of an MPF, ORSO or Macau Pension Fund scheme, retirement savings form part of your investment portfolio. Like all investments, your provident funds must be tracked and regularly assessed against your age and investment objectives, as well as market conditions. With hundreds of provident funds in the market however, it can be difficult and time consuming to allocate your assets manually. Want a quick and easy way to manage your provident funds and stay up to date on fund performance? These four steps will help you.

1. Understanding fund risk with the Fund Risk Indicator

You may be familiar with your own risk tolerance, but how well do you understand the risk levels of various provident funds? To discover the funds that best match your preferences, check out the Fund Risk Indicator:

How do I use the Fund Risk Indicator? – Generally speaking, the higher the Fund Risk Indicator index, the higher the level of risk. This will give you an idea of the risk involved in investing in a given fund, allowing you to decide according to your risk preferences.
Where is the Fund Risk Indicator? – The Fund Risk Indicator can be found on the Fund Fact Sheet, the Fee Comparative Platform on the Mandatory Provident Fund Schemes Authority website, and in Our Products section.

Keep in mind that the Fund Risk Indicator is just a point of reference. Other factors should be taken into account when you are choosing a fund, such as the investment period and investment objectives.

2. Different indicators mean different things. Find out how returns are calculated for a better understanding of fund performances

You may notice that on your Annual Benefit Statement, fund performance is calculated in several ways:

Calendar Year Return – This is the one-year return that captures a fund's performance from the beginning of the year (1 January) to the end of the same year (31 December)
Cumulative Return – This is the fund's return over a period of time. In general, a fund fact sheet will include the 3-year, 5-year, and 10-year period
Annualised Return – This is the fund's return over a period of time, but expressed as an annualized result, with investment period, compounding effect, and cumulative return all taken into account.

The above mainly reflect the fund's returns over a specific period of time as a lump-sum investment, and may not fully reflect the actual performance of your provident fund investment. If you are looking for return information on a more personal level, you can refer to returns under dollar-cost-averaging.

3. A more comprehensive way to calculate returns: dollar-cost-averaging

Since investment periods differ from one member to another, it is best to refer to the returns under dollar-cost averaging for a more comprehensive review of performance.

Dollar-cost averaging – When fund prices rise, fewer fund units are purchased; when the price drops, more are purchased. The dollar-cost of the investment is thus averaged out. As retirement funds are fixed-term investments carried over long periods, dollar-cost-averaging helps to average out the per-unit fund cost and secure higher returns.

The “Investment Return for the Period” in the Annual Benefit Statement generally reflects fund performance under dollar-cost averaging.

4. Automatic asset rebalancing service delivers convenience and ease

Automatic asset rebalancing service helps reallocate assets between equity and fixed income funds, automatically rebalancing an MPF portfolio according to member age. Nearer to retirement, the ratio of equity funds will be automatically reduced gradually, freeing you from having to manually rebalance the equity and fixed income fund ratio of your MPF investments. Additional advantages include:

High flexibility – Depending on market conditions, you can stop or restart the service whenever you wish. For example, if there is turbulence in the equity market prior to rebalancing, you can stop the service to avoid incurring losses through the reduction of equity fund shares. Once the market stabilises, you can restart the service, allowing for the automatic allocation of your assets according to their pre-set investment ratio.
Catering to personal investment needs – Our automatic asset rebalancing service caters more effectively to your personal investment needs than target day funds. If your target for retirement is 2050, for example, but existing target day fund options are only applicable until 2045, its fixed investment ratio might not be a good fit for your investment needs.