A 401(k) is a type of retirement investment account that companies offer to their employees. At most companies, employees have the option of contributing a monthly pre-tax amount to their 401(k), which the company will sometimes match. The advantage is that pre-tax money compounds in the investment account over time. Investors can withdraw money without penalty when they turn 59.5 years old. Sethi’s single most important piece of advice for readers is that they take advantage of their 401(k) accounts because the money invested by their companies is essentially free money.

Asset allocation is “the way you distribute the investments in your portfolio between stocks, bonds, and cash” (221). In the context of investing, an asset is a specific investment, for example a stock or bond. Asset allocation is essential to Sethi’s investing advice, as he emphasizes that many people operate under the misconception that the key to lucrative investing is picking the right stocks. He argues that, in fact, the key to lucrative investing is spreading investments out over asset classes in order to mitigate risk.