Since the inception of the Mandatory Provident Fund (MPF) in 2020, its assets have overshot HK$1.1 trillion by March 2021. In this pool of Hong Kong employees, more than 60,000 have already amassed past HK$1 million in their accounts. Of course, the very name of MPF indicates it is part of an individual’s retirement planning and should not be seen as a pure investment. Still, the investment discipline exhibited in MPF operations can indeed help grow your wealth effectively.
Talking of wealth accumulation, it is worth highlighting a key feature of the MPF: free switching of funds under the same fund provider. This feature sheds a powerful light as to how we should invest to accumulate wealth effectively.
Don’t ignore reallocation fees
During long-term investment, one would inevitably have to reallocate their portfolio to accommodate changes in market conditions or situations in life.
But do you ever know the cost of such moves? For example, you adjust an investment every six months, which incurs a fee of 1%. That would be 2% a year. What’s troubling is, after 20 years, the charges spent on readjustment is an enormous 40%! So, with high hope of capturing market opportunities, have you ever thought that manoeuvring your investment may not cost out the growth?
Furthermore, work and retirement are only one part of life. For many, wealth is meant to be grown and succeeded. In this aspect, investment takes an even longer timeframe and is therefore more sensitive to the fees involved. Moreover, if you plan to pass down wealth to the next generation with these investments, do not forget they may be subject to hefty inheritance tax in certain countries, meaning even less can be pocketed.
Investment-linked insurance with conversion fee exemption for the peace of mind
To avoid the abovesaid troubles and unnecessary expenses, investment-linked insurance may be a solution. Such a policy belongs to the life category, which enables policyholders to nominate beneficiaries. It may, during the probate process, help circumvent legal challenges from other related parties and facilitate smooth and complete inheritance.
Leveraging insurance plans like these, policyholders can also allocate their premium among more than 160 investment options according to their risk tolerance. Conversion fee is waived to ease your concern with repeating costs. To encourage long-term investment, insurers often offer loyalty rewards. For those who wish to expand their wealth and have some cash flow, consider options with monthly dividends. It is clear that if you want to preserve the flexibility of your investment and as well want less taxation confusion or unnecessary fees, these products may just be what you need.
The accumulation and inheritance of wealth require great wisdom as ever. Mastering wealth management tools sets an exemplar for your beneficiaries to exhibit how wealth can be maintained effectively beyond generations.
The above content is reviewed by Mr Daniel Lau - Head of Investment Proposition of AXA Hong Kong and Macau
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AXA’s investment-linked insurance products at your choice.