Don’t mix MPF with your personal investments: stop chasing the market

Year-end is when investors review portfolios and redeploy on market forecasts. But should long-term MPF be reshuffled with every market swing like personal investments? Fidelity’s “MPF Behaviour Survey 2010” uncovered an interesting contradiction.

What did the survey find?

Of 500 respondents, over half didn’t know what role MPF plays in their overall asset mix, so MPF never reached its full potential — yet 49% said they switch their MPF allocation whenever they change personal investment strategy, hoping to “catch” the market. Members rarely care about MPF, but hate missing a rally.

Why shouldn’t you switch them together?

MPF’s purpose, nature and time horizon differ from personal investing — changing personal investments doesn’t require changing your MPF allocation. MPF is long-term: the goal is steady, long-run returns for retirement, not the occasional windfall — a world away from IPO subscriptions or stock flipping. Unless markets change durably and materially, leave the allocation alone.

So how do you get the most from MPF?

Active management is needed, but it doesn’t mean chasing markets; simple steps like consolidating MPF accounts can lift overall returns. Before choosing a scheme, ask yourself: your age, income, years to retirement, desired retirement lifestyle, risk tolerance — then pick the MPF plan that fits.

To compare schemes, visit MPF fund comparison; for account consolidation, see the MPF education hub.