How should you choose MPF funds? AIA: don’t rush to switch portfolios on market swings — review at least once a year

The European debt crisis plus the US Federal Reserve’s “Operation Twist” sent markets swinging in September 2011. AIA’s senior vice-president for pension management and trust said MPF members need not rush to switch or reallocate their MPF portfolios — equities were expected to stay under pressure in the short term, but MPF is a long-term investment, and short-term swings are no reason to switch frequently.

How should you choose MPF funds for the long run?

Choosing MPF funds is less about chasing short-term markets than about matching your age, risk tolerance and years to retirement — and reviewing regularly whether the mix still fits. A survey found 42% of members had not reviewed their MPF portfolios in the past year, which counts as negligent management; the advice is to review at least once a year, and to stay calm rather than rush to switch when markets swing.

42% went a year without reviewing

According to the survey cited, 42% of members had not looked at their MPF portfolios in the past year — negligent management. Members can use market volatility as a prompt to review their portfolios, she said, but there is no need to switch in a hurry; at least one review a year is recommended.

“Semi-portable” MPF: fees to fall, but no price war

On the coming “semi-portable” MPF (the Employee Choice Arrangement), she believes management fees have room to fall but does not expect a price war. Nor does she expect fiercer competition to accelerate industry consolidation or mergers — even after a successful acquisition, members could still switch to other providers under the ECA, leaving the enlarged business’s scale uncertain.

To see where your MPF portfolio stands in the market, see MPF fund search.