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Article | MPFexpress

Switching MPF Funds too frequently is likely to be counterproductive

By Elaine Hwang and William Chow | September 28, 2023

Understand why frequent MPF fund switching does not necessarily result in better return. This article in English and Chinese is available for download.

Due to the long-term nature of Mandatory Provident Fund (MPF) investments and the fact that funds can only usually be accessed upon retirement, many members do not actively manage their MPF portfolios. As a result, MPF providers often remind members to review their investment portfolios and make adjustments when necessary. A recent survey has shown an increase in the number of members who made changes to their MPF investments during the pandemic. However, frequent switching of MPF funds may not necessarily lead to better returns in the longer run.

Working from home provides time for review

According to an MPF provider’s survey, the number of members who switched their MPF investments in 2022 increased by 60% compared to the pre-pandemic level in 2019. Analysts believe that during the pandemic, many members had more time at home due to remote working arrangements, which allowed more time to review and switch their MPF investments. Additionally, the investment market experienced a high level of volatility during the pandemic, and many members were influenced by market sentiment when making investment decisions.

Difficult to time investment switches accurately

The same survey suggests that frequent MPF fund switching does not necessarily result in better returns. While some members benefited from switching at the right time, many others suffered from switching at the wrong time, resulting in significant underperformance. Markets are unpredictable, and capturing the correct timing is challenging and involves an element of good fortune. Therefore, for some members who make investment switches based on market fluctuations and sentiment, the outcome may not always align with their expectations.

Risk level is key to investment decision-making

The MPF industry encourages members to review their portfolios, with a focus on whether their investment horizon and risk appetite have changed and whether they align with the risk level of their investment portfolio. As the MPF is generally a long-term investment, the industry does not generally encourage members to engage in short-term speculation based on market conditions. While it is natural to seek improved performance through portfolio switching, it is crucial not to deviate from a member’s underlying risk tolerance.

Consider thematic funds and the Default Investment Strategy (DIS)

With the increasing availability of fund choices from MPF providers, such as thematic funds focused on environmental, social, and governance (ESG) or retirement income, etc, members can explore the suitability of these new funds during portfolio reviews. If members lack knowledge of investments or an understanding of the risk level of different funds, the Default Investment Strategy may be worth considering.


Senior Director & Business Development Lead, Greater China

Head of Retirement, Hong Kong & Macau

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