How to Choose MPF? The Four-Step Narrowing Method

This article is a rewrite of a report from October 2012.

How to choose MPF?

Use the “narrowing method” — four steps from 500 funds to a handful. After semi-portability, choosing the right product topped workers’ concerns. The chief executive of an MPF consultancy proposed the narrowing method: progressively eliminate unsuitable products, then pick from the few survivors.

Step 1: Know your type

Aggressive? Start with the 160 equity funds. First establish what investor you are and how much risk you can bear. If aggressive: of 500-plus MPF funds, about 160 are equity funds — step one narrows the field to those 160, discarding the other two-thirds.

Step 2: Pick your best-known region

Hong Kong? From 160 down to 40. Ask yourself: which region’s prospects do you favour, or know best? If Hong Kong — about 40 Hong Kong equity funds take the list from 160 to 40.

Step 3: Compare 3–5 year returns

Shortlist the top five. Over three or five years, tabulate the 40 funds’ returns and take the best five. Compare like with like — same period, same category — or the ranking means nothing.

Step 4: Compare fees

Drop the expensive ones. Only now compare fee levels, eliminating high-management-fee funds — what survives best matches your needs on returns, fees and prospects alike.

Which regions did the expert favour?

Asia-Pacific — especially Southeast Asia and Greater China. She judged Hong Kong equity funds relatively risky; Asia-Pacific equity funds looked better long-term, Southeast Asia and Greater China positive; Europe and the US disappointed — the euro crisis unresolved, US recovery slow.

What is the lesson from 2012?

Picking funds isn’t trawling the ocean — it’s filtering through a funnel. The 2012 narrowing method remains the most practical MPF-choosing guide: risk type → region → returns → fees, four steps, 500 funds to a few. Learn to filter, or drown in choice.