2019 Investment performance builds real wealth. Or does it?
2019 was one of the best years on record for MPF members with the average investment return achieved by MPF Schemes being 12% p.a., over 4 times the annual rate of inflation.
12% is a significant result with real wealth created in 2019. With total MPF assets now nearing HK$1 trillion the average MPF member now has an account balance of over HK$340,000. It appears all members should celebrate, but should they?
While on average, members achieved a 12% return in 2019, depending on which asset class, and which fund(s) one was invested in within the asset class, a MPF member’s return would have varied, and varied significantly. Seemingly, being in the right asset class, but the wrong fund(s) would have had a profound effect on your MPF wealth.
In 2019 (using the largest asset class invested by MPF members (HK/China Equities) as the proxy) the breadth of performance between the best and worst performing funds was 24.37%, the widest difference over the past five years (Chart 1).
On $100,000 invested over ten years this represents an $785,000 difference, or put another way, that’s the equivalent of four years average salary; the difference between working four extra years or retiring four years earlier.
Clearly choosing the right asset classes and right fund(s) are important for better retirement outcomes. Tools such as www.mympfchoice.com assist members make more informed, and therefore, better fund decisions to achieve better retirement outcomes.