Two Ways to Switch MPF Funds — and Which Suits You

Rewritten from reporting published in April 2012.

Most employees have never switched their MPF investment mix. The reasons usually come down to three: apathy, too little information, or simply not knowing how. In fact there are broadly two switching models on the market — knowing the difference keeps you from switching the wrong thing.

How Many Ways Are There to Switch MPF Funds?

There are two main ways to switch MPF funds: change the proportions of specific funds, or reset the distribution of the entire portfolio. Some trustees offer only one model; a minority offer both and let you choose.

What Is the Difference Between the Two?

The first method is clearer and avoids extra dealing procedures and possible transaction fees; the second works like a reshuffle, where the trustee may sell all your units and buy them back again.

Method	How it works	Pros and cons
Change specific fund proportions	Move all or part of Fund C into Fund A, leaving A and B untouched	Clearer, saves on fees
Reset the whole portfolio	Re-enter the fund distribution, e.g. changing a 60/40 split to a new mix	Like a reshuffle — even funds you meant to keep may be sold and repurchased

To put it in perspective: saving $1,000 a month at an assumed 5% annual return makes you a millionaire after 35 years; do nothing, and 35 years leaves you with dust.

What Is the Most Common Switching Mistake?

The most common mistake is failing to distinguish whether the instruction applies to your accrued balance or to future contributions. Say the market looks bottomed out and you want new contributions to go into equity funds — but you mistakenly point the instruction at your accrued balance, and it gets sold at the current low before being repurchased.

Online Switching or Paper Form?

Most trustees offer online fund switching with unlimited free switches, while mailed forms often carry an annual limit and may incur charges beyond it. Markets move fast, so online switching is the smarter choice — but watch the actual dealing dates, the fund prices used, and each dealing day’s cut-off time.