#risk

A $1 million personal umbrella policy averages $300 to $400 a year. Each additional million runs $75 to $150. That pricing curve tells you what the product is: insurance against something that almost never happens, and the reason your liability is uncapped while your coverage is not.

Diversification lowers the risk of your portfolio without lowering your expected return. That combination is rare enough that economists call it the closest thing to a free lunch in finance. Here is how it actually works, and where it stops working.

Volatility isn’t the same thing as risk. It isn’t the same thing as direction. And the most-quoted volatility number on TV measures something almost nobody understands.