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3 mins readYour Guide to a Secure Retirement Through Smart Fund Selection
Worried about retirement? Your investment decisions may directly impact your retirement savings. Understanding different types of MPF funds and their characteristics is the first step towards achieving your ideal retirement life.
According to MPFA data as of March 31, 2024, there are 379 MPF constituent funds in the market, covering equity funds, mixed asset funds, bond funds, guaranteed funds, money market funds - MPF conservative funds, and money market funds – other than MPF conservative funds. Generally, the higher the expected return, the higher the potential risk.
Here are the main features and risk levels of each fund type:
| Fund Type | Investment Objective | Investment Tools | Risk Level | Annualized Average Net Return* |
| Equity Fund | Aim to achieve capital appreciation and a return higher than inflation over the long term. | Stocks | Relatively high | 3.8% |
| Mixed Asset Fund | Aim to achieve long-term capital appreciation by investing in a mix of stocks and bonds | Stocks and bonds | Medium to high | 3.8% |
| Bond Fund | To earn a stable income from interest or bond coupon rates, and make a profit from bond trading | Bonds | Low to medium | 1.9% |
| Guaranteed Fund | Provide some forms of guarantee, usually on the capital invested or on a minimum rate of return | Bonds, stocks, or short-term interest-bearing money market instruments | Relatively low (but also depends on the fund's guarantee terms) | 0.9% |
| Money Market Fund - MPF Conservative Fund | To earn a rate of return similar to the Hong Kong dollar savings rate | Short-term HKD bank deposits or short-term bonds | Relatively low | 0.8% |
| Money Market Fund – Other than MPF Conservative Fund | To earn a rate of return similar to short-term savings rate or stable income from interest or bond coupon rates | Short-term, high-quality interest-bearing securities (e.g. short-term certificates of deposit, government papers or commercial papers) | Relatively low | 0.6% |
| Total: | 2.6% | |||
*Source: MPFA Quarterly Report March 2024, data from December 1, 2000, to March 31, 2024
Note: The annualized inflation rate for the same period was 1.8%
According to MPFA data since December 1, 2000, higher-risk funds have yielded higher returns. Equity funds and mixed asset funds have achieved annualized returns of 3.8%, making them the most popular fund categories among Hong Kong workers. As of March 31, 2024, these two types of constituent funds accounted for 44% and 35% of the total net asset value, respectively.
How to choose the right constituent fund for you?
Members should tailor their investment strategy based on individual needs, age, and risk tolerance, and utilize dollar-cost averaging to harness compound interest effects. Young people with investment horizons of 40 years or more can typically withstand short-term fluctuations and are suited for more aggressive stock-bond allocations to pursue capital appreciation. However, members nearing retirement age should consider lower-risk investment portfolios to safeguard their capital.
By understanding the characteristics of various fund types and making informed choices based on your personal circumstances, you can more effectively plan your MPF portfolio and pave the way for a worry-free retirement life.
Disclaimer: The information, data, and documents provided on this website are for general reference purposes only and should be used as self-help tools. Investment involves risks, and unit prices may fluctuate. Past performance figures shown are not indicative of future performance. BestServe Financial Limited and its content providers are not responsible for any loss or damage caused by reliance on any information or advice made in this website.
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