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Investing in funds is becoming increasingly popular in recent decades amongst those who have recently retired. Whether it is to find a sufficient financial stream to maintain a longer retirement life or earn a couple more bucks, investing requires some due diligence. So if you have no experience in the finance sector, this article will quickly introduce the various types of funds in the Hong Kong market to get you started.
Although safe, bank savings and low-risk products, like bonds and annuities, have too little return. So we need to look for other means to preserve our capital while getting a reasonable return. 
Mandatory Provident Funds
The most common fund investment in Hong Kong is perhaps Mandatory Provident Funds (MPFs). These funds are designed specifically for retirement savings and for the self-employed. There are currently five primary types of MPF funds for scheme members: MPF conservative fund, guaranteed fund, bond fund, mixed assets fund, and equity fund. Their risk levels range from relatively low to relatively high, respectively. With higher risk comes higher reward; their annualised rate of return can range from 0.7% to 5.5% (Dec 2000 to Dec 2017, Source: MPFA).
Managed Funds
Managed Funds are another type of fund and can produce a higher return than MPFs, but with a correspondingly higher risk. These funds are usually umbrella funds investing in bonds, stocks, equities and other instruments, such as derivatives. 
It is important to remember that each of these investments is subject to risks to the capital and the return expected from the investment. For example, for funds which invest mainly in stock, the value of the funds may fluctuate in response to market changes and the performance of the companies. But funds that invest primarily in bonds are generally more stable. However, since the return is influenced by the market interest rate and credit rating of issuers, it tends to be comparatively low. Higher risks also exist in funds which invest in emerging market securities or a single market sector or country. For funds that use derivatives extensively in their investment, the risk level is even higher. If investing in a foreign currency, the exchange rate is also a factor not to be ignored.
Administrative fees are deducted from the funds at the start of the subscription. Therefore, managed funds are generally regarded as a longer-term investment, though, in theory, you can redeem the capital anytime if the terms of the individual fund allow it.  
Investors would receive monthly dividends for their investments. However, these are subject to the performance of the funds. Be aware that the dividend may be paid out from the capital amount resulting in a decrease in net asset value. Investors can inquire about relevant matters with banks or financial institutions.
Before deciding which fund(s) to invest in, you should learn about your risk tolerance level. Here are three key factors to consider:
  • How many years are there before you cease to receive any recurrent income from employment?
  • Can you set aside a certain amount of savings or earnings (e.g. rental income from properties) after providing daily maintenance for your and your dependents?
  • How much risk are you prepared to take?
After assessing your risk tolerance level, be sure to check with the banks or financial institutions about the risk level accorded to you for investments. They will ask you questions about your experience in investing, the purpose of investment, the percentage of the money to be used for investment against your total asset and family spending and more. After knowing the risk level you can afford to take, you should only consider those funds with a risk level not higher than you can afford to lose. Finally, remember to consider the scope of investment activities of each fund, its objective, focus, track record, risk and return profile, and administrative fees. 
Generally speaking, passively managed funds (like index funds) will have lower fees than actively managed ones. Also, a portfolio diversified across asset classes, industries and markets have a much better chance of delivering long-term returns than one with a narrow scope.
While studying the pricing structure and fees associated with the fund is necessary, the most important thing is to make sure the fund(s) fits into your retirement plan.