MPF fund performance: what three rising months in early 2012 taught us

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

The original was a short market brief: MPF looked set for a third straight monthly gain, with February 2012 average returns estimated above 2 per cent and laggard Japan and Europe equity funds rebounding about 5 per cent. Rather than stretch those few lines, this rewrite puts the numbers in their 2012 context — and draws out the lesson that a rally is not a reason to pile in.

How strong was the early-2012 MPF rebound?

J.P. Morgan Asset Management estimated in early March 2012 that MPF average returns would rise more than 2 per cent in February, led by long-struggling Japan and Europe equity funds up about 5 per cent; together with a record 4.9 per cent January surge and a 0.36 per cent December uptick, that made three consecutive monthly gains, reversing a year of gloom. The bank’s executive cautioned that the eurozone debt crisis made full-year prospects uncertain.

Does a three-month rally justify raising risk?

No: a three-month bounce does not change the discipline of long-horizon retirement investing, and 2012 was an election year with a mainland leadership transition and an unresolved European debt crisis — every source of volatility was still in play. The lesson of that era was to use rallies to review asset allocation, not to chase the gains.

What is the lasting value of short-term return figures?

Their value is as a reminder, not a signal: a monthly return is only a snapshot, while MPF is a decades-long marathon, so the variables worth your attention are the ones you can control — fees and fund allocation — reviewed regularly rather than month by month. That discipline mattered in 2012, and it still does.