Mandatory Provident Fund (MPF) scheme members concerned by current returns may be tempted to tinker with their fund choices and look around for better prospects, but experts caution against such short-term thinking.
'If investors have given sufficient thought to their fund selection and strategy, they shouldn't need to react to the current period of volatility by buying and selling too much,' says Philip Tso, director of investment services for consultancy firm Towers Watson. 'Markets are very sensitive right now, but we have had other crises in the past 15 years and have always seen things recover after a downturn.'
In his view, the chance of no material gains on well-planned MPF portfolios over, say, the next five years is slim indeed. European economies may still be suffering, but Asia is showing resilience and the United States appears to be on the right track, so opportunities for growth are there. Some ups and downs must be expected as just part of the usual investment landscape.
One thing Tso does suggest, though, in the present climate is taking a closer look at fixed-income and bond choices available under the MPF structure.
'If you are worried about the volatility of equities, this is probably the way to go, especially if looking at a relatively shorter investment horizon. Fixed income may not give a [better return] every year, but people may find it easier to sleep at night.'
He notes too that the planned introduction of employee choice arrangement (ECA) later this year will be a logical point at which to conduct a full review of one's MPF strategy and options. Ideally, this should consider annual performance to date, a comparison of similar and alternative funds available from other providers and, of course, the different level of fees charged.
'The majority of people have stuck with their original strategy from day one,' Tso says. 'But ECA should encourage individuals to take a more active interest in where their own contributions are invested.'