Too risk averse?

Our company has an employee stock purchase plan. The company matches the purchases which works out to 25%. Most people, even those who don’t have any other stocks, participate in this plan for a few good reasons. Most importantly because we believe in the future of our company stock and the 25% match. Also, it’s saves on trading fees.

During lunch one day we were talking about this and it came up this newish employee didn’t sign up for the plan. She didn’t seem to be aware of the 25% match. When she found out about it she seemed a little interested. So she commented that basically it’s like we get a 25% gain. We pointed out that’s true but your money is not guaranteed because it is a stock and prices may fluctuate. She was completely scared away by that. Even though most analysts are confident about the future of our company, and as employees we are feeling pretty good about our future.

Can one’s aversion to risk be too much? If with a 25% head start, she still can’t consider the idea of buying a stock, she is limiting herself from many other types of investment options. There is usually a correlation between risk and returns. It’s possible that during certain cycles of the economy her risk level is so low that her returns aren’t keeping up with inflation? I read once that one women’s retirement savings of $300K was all in GICs and other guaranteed return investments. Great for her because it’s not easy to save $300K. However, when I look at the interest rates right now, and the taxation structure, her money is probably losing value.

It’s great to be money conscious, to earn and save as much money as you can. But it’s also important to educate yourself on growing the money that you have (without losing sleep at night).