This article is a rewrite of a report from June 2012.
Fund investing could feel foreign to workplace newcomers, but choosing suitable MPF funds wasn’t hard: understand each fund’s features and terms first, then choose smartly by personal goals and needs. This second instalment of a series walked through the MPF fund types.
How did the five fund categories differ?
| Category | Mainly invests in | Risk level | Suits whom |
|---|---|---|---|
| Equity (growth) funds | Stocks on approved exchanges | Higher, volatile | Long horizon, high risk tolerance |
| Mixed-asset funds | Equities plus bonds, for medium-long-term growth | Between equities and bonds; more equities, more risk | Those picking equity-bond mixes by life stage |
| Bond funds | Government, public-sector and corporate bonds meeting rating/listing rules | Low to medium; rate swings or downgrades are the risks | Lower risk tolerance, balanced medium-long-term returns |
| Money market funds | Short-term bank deposits and bonds; returns near HKD savings rates | Lower, but may trail inflation when it’s high | The risk-averse |
| Guaranteed funds | Bonds, equities or short-term money market instruments; capital/return guarantees usually conditional | Lower, but not zero-risk | The risk-averse (guarantee only if terms met) |
Why weren’t guaranteed funds risk-free?
Their conditions fell into three buckets: lock-in periods (redeeming early or the employer moving accounts voided the guarantee), limited guarantee periods (e.g. three years, then automatically non-guaranteed), and withdrawal requirements (only specified events like turning 65, early retirement, death or total incapacity qualified).
Money market funds weren’t zero-risk either: in high inflation, returns might not beat rising prices. The lesson: risk levels differed by fund — always read the terms first.
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