MPF consolidation: save first, invest later when the economy slides

In October 2011, with the European debt crisis clouding global markets, a financial adviser’s guidance to “Miss Chan” was blunt: mainstream investments would suffer from the economic slide and financial-system turmoil for the next two years, leaving few worthwhile instruments — so prioritise targeted saving now and add risk only after end-2012. The six-point plan below centres on two tasks: tidying up asset allocation and tidying up the investment portfolio.

What is MPF account consolidation?

MPF consolidation means merging scattered personal accounts held with different trustees into a single preserved account for centralised management, making it easier to review the total balance and rebalance the portfolio as one. The October 2011 advice: if you hold several MPF accounts, consolidate them into one preserved account and switch to the more defensive Hong Kong-dollar money market fund, moving back into equity or mixed-asset funds only when markets stabilise; the current employer’s account could be switched into Asian equity or bond funds where appropriate.

How should assets be positioned in a downturn?

1. Take out critical-illness cover with cash rebates: reasonably priced at her age and doubling as forced saving; if the employer already provides medical cover, defer that decision.
2. Consolidate MPF accounts into one, park in a Hong Kong-dollar money market fund defensively, and rotate back into risk assets when conditions settle.
3. For HK$180,000 in Hong Kong equities: 50% into blue chips, the rest split between ETFs (no more than 25%) and small/mid-caps (no more than 25%); avoid leveraged tools such as callable bull/bear contracts, options or futures.
4. For HK$250,000 cash (foreign currency plus Hong Kong dollars): if not needed soon, half in a renminbi demand account and half in short-term interest-guaranteed savings insurance — low risk with a reasonable return, better than idle Hong Kong-dollar deposits.
5. Renminbi bonds: avoid everything except official issues.
6. Start a target savings fund with fixed monthly contributions compounding over time:

What is the most important reminder?

These projections exclude advisory fees and bonuses — they simply show that wealth is accumulated, not won by luck or speculation, and that the time horizon decides the outcome. Review the plan yearly and remember that haste makes waste: with a solid foundation, goals come true gradually. For how to align an MPF portfolio with life stages, see the MPF education hub.