Why My Mom Will Never Change Soy Sauce Brands and What it Taught Me About Risk-Aversion


Risk averse choices

My mom must be one of the most risk-averse people I know.

She sticks to what she knows. From routes to work down to the brand of soy sauce she buys.

“Aye-ya, now we have to suffer until we finish the bottle”.  She once chided my dad.  He had brought home a new, previously untried bottle:  “Just to see”.

My dad loved to try new brands and products. On the other hand, the risk of suffering through a bad bottle of soy sauce just isn’t worth it for my mom.

No surprise that her investments take the same approach.

Maybe we are not as extreme with the soy sauce but I think a lot of us share her fears

My mom has checking and savings accounts with 4 different banks and most of her investments are various GICs that she shops around to find the best rate.  That’s the extent of her “investments”.

Having accounts at 4 different banks is her version of diversification; in case any 1 bank has a run.  She grew up an era & place where Banks might experience such things.  And she said that she worked hard (boy, did she ever!) for her savings so it would cause her a lot of upset if she saw it go down.

Although my eyes bulged out when she told me, this kind of profile is actually quite common, especially for women.  There is a lot of evidence that women do hold more money market and savings products in their financial portfolios.  And generally, women are less likely to invest in assets like equities and bonds or alternative investments (ones beside her primary real estate).

When asked what money represents to women, many of them respond with “security”. And the traditional dictionary synonym is “risk-free.”

This has led to women, as a group, being seen as more “risk-averse”.  After some push-back, it’s been renamed as “risk-aware”.  But naming (or re-naming) something doesn’t really get to the heart of the issue.

What Women Want

If you hear the talk in the Financial industry about how to ‘reach women’, how to market to them to buy their product, it’s geared towards changing her mind.  We have to learn how to speak “her language”.  They approach the issue as if we have been calling equities or stock markets something else.

When I ask my friends, they all know what stocks are called.

So ignorance isn’t it.  What else? Some have pointed to confidence.

Existing institutions view this risk-aversion as just a feeling or that something that women need to “get over”.  Just get some “financial confidence!” But they neglect to show us how.  Read a couple of blogs and financial literacy books?

Sure that helps, but is that enough for women to just “get over it” and embrace the markets? (ironic since this is a financial literacy blog, but stick with me)

Initial Risk Tolerance Analysis

Risk is not set in stone and it hinges on many factors.  In my last article, I outlined that risk falls under the general categories of Investment risk, Ability to take risks and Willingness to take risks.  The last 2 are specific to the individual and their circumstances.

As previously described, investment risk is the same for everybody – if a stocks fall 5%, everyone holding that stock experience the same 5% fall. So that’s not the cause of risk-aversion.

Let’s take a look at investment risk for women using the traditional risk framework of Ability and Willingness.

If we look at the Ability to take risks, women seem to be in a good spot.  Over the recent decade, women have surpassed men in university and graduate degrees.  We are climbing corporate ladders in professions such as Medicine, Law, Finance and Technology.  There are many dual income households where the women are bringing home more than her partner.

On top of that, research has also shown when women invest, we often experience better investment returns and we are more likely to answer more financial questions correctly.

On the surface, it seems that women have the ability to take risks.

So Why aren’t Women Taking More Risk?

Ability is how much you make and how much you have.  For many reasons, which are too long for this article to get into or do justice, women face many challenges when it comes to money and still earn less than men over our lifetimes.  So our ability on that factor alone is lower.

Ability is also often referenced as age.  The younger you are, the more you are able to take investment risks.  The logic behind this is that if you lose what you invest, you would still have time to either earn more (through income) or wait for the investment to rebound.  I think here, women are less secure about their ability to just “make more”.

Even though today, more and more women are being promoted and working in high paying professions, there is still a glass ceiling.  Again, many reasons may exist for this ceiling.  Some people don’t actually believe it exists.  But just taking a look at senior leadership roles in major companies it is obvious that representation is not 50/50.

As a woman investing my earnings into the market, I might not be as confident about my ability to go make more money if I lose it.  This confidence is not related to my talents or credentials, but on factors I can’t control.  Factors like does my manager think if I’m going to take time off to have kids so he gives the plumb project to my colleague? Or if I have kids, are the managers going to think that I’m no longer willing to put in extra hours, or travel for work?

So while we may be earning more than before and perhaps we are still relatively young, it doesn’t directly translate to an increased ability to take on risks the same way it may for men.

What “Security” Actually Means

My mom refused to throw that darn bottle of soy sauce away because she was not secure in her ability to afford the next one, even at $4/bottle (or the one after that, or the one after that). In her case, it was a bit extreme, but I totally get that fear.

Money in the bank does represent security for me.  It’s my ability to feed myself and secure shelter for myself as I move through life. Because of money challenges that women face, I might not be able to earn more later.  If I worry that this money might be all I get, I better make it stretch & last.

Money represents survival.  And that’s a strong instinct.

When we talk about security, it’s not just a warm fuzzy feeling.

I Hate the Term “Risk-Aware”

As I mentioned earlier, a new term has popped up defining women are more “risk-aware” as opposed to “risk-averse”.  Ok, so we know that risk is out there.  But is this to imply that men are somehow oblivious to the risks that investments pose?

And what does “risk-aware” really mean anyway?  That women have better “risk-adjusted” returns?  Or that we are all factoring in the true “risk premia” (additional compensation for taking on more risk) for investments and all assets are overvalued so we don’t buy any?

I doubt it. And it’s beside the point anyway.

Willingness to Take Risks

At 9 years old, I remember racing down a hill on my bike, hands in the air, feeling the rush of gravity pulling me down faster and faster.  Little did I know that a car was rounding the corner, we both swerved. I ended up falling off and landing on my knee. There was a lot of blood.

After that experience, when I went to a ski resort for the first time in my 20’s, I looked up at the mountain and said “oh hell no!”

I had experienced enough skinned knees, bruised shins and cuts to my forehead to know what kind of situations is going to hurt.

But when it comes to investing, we are still learning about these risks. We are learning which hills are steep and which ones we can handle.  As with physical pain, we are not so eager and willing to put ourselves in financially painful situations.

We’ve not had as much experience in taking financial risks. We have always been taught to save and to budget.  But few of us were taught how to invest.  So right now, we are learning and practicing how to evaluate investment risk.

I feel like the industry is expecting us to skip this step.  They are asking us to go to a rock climbing gym, pick a course and climb it without any training or experience.  Oh, by the way, your future survival will depend on how well you do.

Hey, no pressure!

Under those circumstances, wouldn’t you choose the easiest and lowest risk course too?

women risk averse


The short answer is no, women are not more risk-averse.  We are balancing the risks in our lives.  Some risks are structural that other demographics don’t really have to face.

We are balancing investment risks against our lower asset base.  We are balancing our ability to take investment risks against the common assumption we have the ability to “just make more” money later.

What’s more, we are learning about the different investment risks against of sea of economic changes, political changes, investment options & strategies.  Each of these poses their own risks to our ability to secure our future.

When taking all that into account, we are not at all more risk-averse. Just like you never know what goes on behind closed doors,  we have hidden risks that other people looking in may not see.

Can women take more investment risks?  Some can.  Some can’t.  Money Market and savings aren’t the best strategies for securing our futures.  But for some women, it is.  If you want to get out of a bad relationship, you’ll need a  pile of cash.  If you want to quit a discriminatory job, you’ll need a pile of cash.

This article is part 2 in my risk series.  Next, I will dive deeper into the topics of Ability to take risks and Willingness to take risks.  After we understand these better, I will sketch out strategies on how to build upon what we have.  This will serve as our center when we go on to construct and review our investment portfolios.

By the way, while I’m more open to risk, I still buy only 1 or 2 brands of soy sauces.  Just to be safe, y’know?

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3 thoughts on “Why My Mom Will Never Change Soy Sauce Brands and What it Taught Me About Risk-Aversion”

  1. Such a great, thorough article about the intricacies of taking risks with your investments.
    As someone who works primarily with women ages 45+ I see that my clients, even those with the ability and capacity to take more risk, shy away from doing doing so. And many of them don’t know the difference between stocks and bonds. They just don’t want to lose money.
    Please keep writing these excellent and informative articles.

  2. Thank you so much, Debbie! This topic is endlessly fascinating. I think we (as an industry) is about to redefine a lot of previously held financial “rules” and “beliefs”. I’m very encouraged by the stats that women will hold more than 50% of household wealth by 2024.

  3. Pingback: How to Increase your Risk Tolerance Part 1: Ability - SundayBrunchCafe

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