Faced with a plethora of MPF funds, how is one to choose?  MPFA’s Fund Fact Sheet is a handy reference for finding information on various funds: http://minisite.mpfa.org.hk/mpfie/tc/useful-tools/fund-fact-sheet.html

 

In any investment, there are three key factors to consider. They are applicable to MPF investments as well.

1. Principal

In MPF investment, the principal is the mandatory contribution, which is subject to a minimum and maximum level of the monthly income of an employee. Young people who have just joined the workforce have relatively low income, and their investment principal is therefore smaller. As they earn more and more by staying in the workforce, their investment principal will grow. When their monthly income has reached $30000, the maximum level that goes into the calculation of their MPF contributions, they will invest $3000 per month ($1500 from the employer and $1500 from the employee).  The mandatory contribution amount is thereby fixed, but an employee can still choose to increase their investment principal in MPF by voluntary contributions.

 

2. Return Rate

Different funds have different return rate. In general, the higher the potential return, the greater is the risk. In choosing an MPF fund, you should determine the proportion of different investment assets after giving due consideration of your risk tolerance level. In a long-term investment such as MPF, one should strike a balance between risk and return.

 

3. Investment period

For MPF investment, the investment period is the number of years between your present age and your retirement age at 65. Young people have a longer investment period, and can therefore entertain a more adventurous investment portfolio. People of middle age might want to reduce the risk level by adhering to a more conservative portfolio. Moreover, the longer the investment period, the more you will benefit from the compounding effect.  In other words, the earlier you start investing in MPF, the higher your return is going to be.