Why Was the Standard Way of Measuring MPF Performance Wrong?

Why Was the Prevailing Measure Flawed?

The MPFA and the industry measured constituent-fund performance over a period as if it were a lump-sum investment — ignoring that money went in instalments, not all at once at the start. For dollar-cost-averaging MPF contributors, that said nothing about what their money actually earned or lost.

Which Fund Did Better Under Regular Contributions?

Example: Fund A rose 12% in a year, Fund B 11.5% — published reports would call A the winner. But investing $2,000 monthly, A earned $1,506 while B earned $1,647. The more volatile Fund B had a lower average cost under regular investing, so its total return was higher.

What Was the Correct Calculation?

Compare the end price against the average cost of the investments — which, for regular contributions, is the harmonic mean taught in secondary school. Fund A’s average cost was $10.54 for a 6.275% return; Fund B’s was $10.43 for 6.864% — a clear reflection of the facts.