The subprime crisis and its negative impact on equity and bond markets, along with the ensuing global economic downturn, have significantly dented the value of retirement portfolios.
The priority for anyone who is thinking about retirement is to decide what investment strategies should be followed to protect MPF savings from taking further hits.
The first step is not to panic, according to Lau Ka-Shi, chief executive and managing director of Bank Consortium and Trust and chairperson of the Hong Kong Retirement Schemes Association.
The typical knee-jerk reaction is for people to pull their investments out of poorly performing asset classes such as equities, which is precisely the wrong thing to do, she said.
'For people who are risk-adverse, don't do anything now unless you believe strongly that you want to get out of a particular fund or need the money,' said Ms Lau. 'This is especially true of funds with an equity component where people are suffering a book loss. By moving your funds out, you realise an actual loss.'
Ms Lau said that by removing the funds from an asset class like equities and into capital preservation funds or money market accounts, investors would also miss the possibility of recouping their losses when the market rebounds.
Some industry professionals suggest that now may be a time for less risk-adverse investors to invest in equity funds because of the dollar-cost average nature of the MPF system.
