Editor’s note: This is the first article in a three-part series by SigFig Advisor Dean A. Junkans, CFA, discussing how investing in your human capital is just as important as your portfolio mix. With 30 years of investing experience, Dean served as Chief Investment Officer of Wells Fargo Private Bank and is a published author.
Most investment discussions typically focus on asset classes, like stocks, bonds, or real estate. When the debate heats up around what’s the better mix or methodology, we often forget to cover the most important asset of all: your human capital.
So, what is human capital? Simply put, human capital is the set of skills and abilities that you can use to earn income or generate wealth over your lifetime. It is an asset that you can optimize to generate additional funds for future investment—more human capital, more potential wealth, more investment possibilities.
However, optimizing your human capital does not necessarily mean maximizing your human capital. Optimizing this asset requires careful evaluation of all the goals in your life, beyond just your investment ones. How do you want to balance your time, energy, and talent in pursuing an income or wealth versus other important elements in your life like family, relationships, volunteerism, and other ways you choose to make an impact? The answer to this question will vary from person to person.
Your human capital assets typically fall into these three areas:
◼ Those that define you;
◼ Those you can control;
◼ Those that matter.
Let’s start by exploring the things that define you and how your very own human characteristics can earn you more capital:
Assets that define you
1. Being a connector. Do you know people who just seem to have a knack for connecting with others? This quality of being a connector is usually a defining characteristic of this group of individuals. The reality is that we live in a world where it is increasingly important to be connected to others. As humans, we desire to feel connected; and more importantly, we are more likely to want to do business and work with people with whom we have a connection. Hiring managers hire people they know and are connected with in some way. Teams excel when they have connectors who can reach out to their connections for introductions, for ideas, and for potential solutions.
2. Being an encourager. Some individuals are naturally wired to give praise freely and are always giving out positive feedback and recognition. If you are not naturally wired to do this, this skill can be learned and improved with practice. One strategy is to carve out some time every Friday to write notes to recognize team members doing great work. The fact that you took the time to hand write these notes has an added impact.
Anyone can give encouragement and recognition, whether it be writing a note, sending an email, or verbalizing specific praise to a colleague. Do not underestimate the power of authentic encouragement and recognition; it can be more valuable than any raise or promotion.
3. Being impassioned with what you do. This might seem like a no-brainer, but passion is one of the most critical ingredients of human capital. New skills can be taught, but passion cannot. The chances of optimizing your human capital are greatly improved when your career is more aligned with your passions.
If you can be a connector, encourager, and passionate about what you are doing, it is likely that your human capital value will be recognized. Stay tuned for the next installment in the series, where we discuss the human capital assets that you can control.