How to choose the best MPF fund in Hong Kong: three risk checks

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

Choppy global markets spare no one, MPF included. But MPF is a long-term investment that smooths purchase prices through dollar-cost averaging — better to learn risk management than to worry. Choosing the best MPF fund in Hong Kong starts with knowing your own risk tolerance.

Which fund suits you? Ask three questions first

First, how long is your investment horizon? The further from retirement, the less short-term swings matter and the higher your tolerance — you might lean toward equities with higher expected returns and higher risk.

Second, what is your temperament? If you cannot stomach sharp ups and downs, consider conservative options like the MPF Conservative Fund, which holds mainly short-term deposits and bonds — remembering that conservative does not mean risk-free, and returns may lag inflation.

Third, do you have other retirement savings? A comfortable cushion elsewhere lets your MPF run more aggressively.

How do you cut portfolio risk?

Do not put all eggs in one basket. Watch “concentration risk”: avoid overloading on a single market or asset class, or one crash can maul the whole portfolio. Keep risk within what you can bear, tend the portfolio — and stop worrying excessively.