MPF Fund Performance Through the Storms: Why Staying Put Beats Market Timing

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

Global markets rattled through 2011, and many MPF members watched their balances slide. Should they switch funds — or sit tight? mpf fund performance data from the MPFA offers perspective: since the system’s 2000 launch, through the dotcom bust, SARS in 2003 and the 2008 financial tsunami, the annualised internal rate of return since inception still exceeded 5 per cent as of June 30, 2011, beating average inflation over the same period.

Should you switch MPF funds when markets turn volatile?

Switching MPF funds in a panic rarely pays. MPF is a decades-long investment, and frequent switching risks buying high and selling low; members should instead review their portfolios every six months, and again at life milestones such as marriage or the birth of a child. Even though the annualised return had slipped to about 2 per cent by the end of September 2011, the long horizon is what matters.

What is dollar-cost averaging?

Dollar-cost averaging means contributing a fixed sum each month: when fund prices rise, the same contribution buys fewer units; when prices fall, it buys more. Over time, the average unit price paid comes out lower than with lump-sum timing — a strategy that works best for young members with decades ahead of them.

How should different age groups position themselves?

Compare long-term MPF fund performance before reshaping your portfolio.