MPF strategy: be aggressive in your twenties, steady after fifty — diversify at every age

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

Marriage, buying a home, having children, preparing for retirement — every major life milestone calls for different financial planning, and MPF is no exception. In the first of a three-part series looking at the young, the middle-aged and retirees, here is the overarching strategy: diversify, and don’t chop and change.

How should MPF strategy change with age?

Members in their twenties — early in their careers with 30 to 40 years to retirement — can generally bear more risk and pursue aggressive strategies for long-term returns. Those past fifty should prioritise steadiness; at every age, never put everything in one fund.

Why diversify even when you’re young?

A balanced, time-tested portfolio must be diversified. Take equity funds — riskier than other types — so even young members with high risk tolerance should hold some lower-risk bond, conservative or money-market funds to smooth overall risk.

Why shouldn’t you switch fund combinations frequently?

MPF is a long-term retirement plan: frequently switching combinations to chase market moves invites buying high and selling low. Use broad trends as reference, but set strategy by life stage, risk tolerance and finances.

What’s wrong with picking a provider on returns alone?

Fund returns show up in cumulative and annualised figures, but choosing a provider on returns alone is one-sided. Also weigh the breadth of the product range, fund fees and service quality — fees eat directly into long-term returns.

The next instalment looks in detail at portfolios for young members. For the basics on fund types and fees, see the MPF education hub.