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Many fresh graduates enter the workplace every year, and they will be required to fill out MPF scheme registration form and choose MPF funds upon their new employment. Since young people are relatively new to workplaces, and may not be familiar with MPF investing, they may have difficulties in selecting MPF funds.

The MPFA encourages “workplace freshmen” to proactively learn about main features of different funds before making MPF investment decisions. They should also formulate a retirement plan that suit their needs, taking into account their risk-tolerance level, investment targets, fund fees, and so forth, at an early stage.

Striking a balance between investment targets and risk tolerance

Currently, there are five types of MPF funds: Equity Fund, Mixed Asset Fund, Bond Fund, Guaranteed Fund and Conservative Fund. Each one has its unique investment target and risk level. For instance, MPF Equity Fund, Bond Fund and Mixed Asset Fund invest in equities and/or bonds. Their expected returns have a better chance of outperforming inflation in the long run, while the investment risk is relatively high. Conservative Fund, in contrast, is a money market fund, which generally use Hong Kong dollar (HKD) short-term bank deposits and short-term bonds as investment tools. It is a low-risk investment, whose aim is to preserve capital.

Some workplace freshmen may adopt a prudent and conservative investment approach when building their MPF investment portfolio. They may be inclined to invest their MPF in Conservative Fund owing to their lack of investment experience. Young MPF scheme members should understand that the investment target of Conservative Fund is to achieve a return similar to the banks’ HKD savings deposit interest rate. As deposit interest rate remains at a very low level, it will not be conducive to capital appreciation, thus making it hard for the return to outperform inflation. Therefore, Conservative Fund is not an ideal option for long-term retirement investment.

As young people have a very long investment horizon before retirement, they have sufficient time to withstand short-term fluctuations in the market, so they can be more aggressive in their MPF investment at this stage. As they age and get closer to retirement, MPF scheme members should adopt a more conservative approach by gradually reducing their investment risk to safeguard their wealth. For more information on retirement strategy for different life stages, please visit MPFA’s MPF investment education thematic website.