Should you switch MPF funds when markets tumble? A 2011 lesson in dollar-cost averaging

In October 2011, volatile global markets dragged Hong Kong stocks down with them. One worried worker asked a familiar question: his MPF portfolio was heavily invested in equities and showing losses — should he switch funds to ride out the storm? An MPFA investment-education column of the time used the question to remind readers that the MPF is a long-term investment, not to be reshuffled on short-term market moves.

Should you switch your MPF funds when the market falls?

You should not switch your MPF funds simply because markets are falling. The MPF is a long-term investment, and members need not fret over short-term price swings; regular monthly contributions buy units through dollar-cost averaging, which smooths out purchase costs over time and helps withstand market volatility.

How dollar-cost averaging works

One defining feature of MPF investing is dollar-cost averaging:

1. Fixed monthly contributions buy MPF fund units at the prevailing market price;
2. When fund prices rise, the same amount buys fewer units;
3. When prices fall, the same amount buys more units;
4. When markets recover, holding more units bought cheaply produces better returns, averaging down the long-run cost.

The decade’s record: 5.5% average annual return

The column noted that over the previous decade, Hong Kong had endured the 2003 SARS outbreak and the 2008 financial crisis, yet the MPF system as a whole still delivered an average annual return of 5.5% — evidence that it could weather such storms and grow members’ contributions.

When should you review your portfolio?

Members should review their portfolios when personal circumstances change — for example, their risk tolerance or the number of years to retirement — and adjust as needed, rather than switching frequently on market news. To understand the risk and return profiles of different funds, try MPF fund comparison or visit the retirement investment education hub.