One way to identify a company that has great prospects is to look at the people behind the company. A truly successful firm must have qualified, competent and experienced people running the show. It is the competence and the knowledge of the managers and administrators that makes the difference between success and failure. This is where human capital comes into the picture and this is why some investment analysts have stated that there is a strong connection between human capital and the success of any business organization. If you want to invest successfully in the stock market, the expression; human capital, an important asset for portfolio diversification should be your guide. Now, let us look at some ways to apply this philosophy to the stock market.

First, we have to admit that one of the smartest things you can do as an investor is to diversify your portfolio. This is a sensible move because diversification protects you in many ways. If you are a stock market investor, you probably know that there are different sectors of the economy. Some companies are in the oil and gas sector while others are in the food and beverages sector. Other firms operate in the energy sector and some operate in the building/construction sector. The point here is that you cannot buy stocks in only one or two sectors of the economy. That would be putting all your eggs in just one or two baskets and this is not safe. The smart thing to do is to invest in different sectors of the economy. When you do this, you have effectively diversified your portfolio. Now, this protects you because if things do not go well in one sector, you are still covered because you are likely to make money in other sectors.

Now, let us assume that you have stocks in one or two companies already and you want to diversify. The point is that you cannot diversify without knowing some things about the other sectors where you want to invest your money. Remember that every private or public company is only as good as the people behind the company. Human capital in any company has to do with the ability, education, skills and experience of the executives in that company. This is why it makes sense to look at a companys profile before investing in that company.  The examples below will prove the point and make things clear.

Microsoft is a successful firm today because of the training, experience and qualifications of the people behind the firm. This makes it an investors choice and a smart option for people who want to diversify. In Nigeria, Diamond Bank and MTN are thriving businesses because the people behind these firms are qualified, experienced and result-oriented. The same thing applies to success stories like Apple, Google, Facebook and Amazon.com.

The conclusion here is quite simple. Before investing in any company, find out if the people behind the firm are good managers who can take the firm to the next level. If they are, you can go ahead and invest in the company in question. Finally, the expression; human capital, an important asset for portfolio diversification should be your guide.