In 1952 Markowitz has developed a model that made it possible to balance incomes and risks in a particular combination of securities and for that work he received the Nobel prize. He described the importance of diversification in the portfolio in order to minimize risks of any particular securities. Rational investors are looking to achieve a higher return while taking less risks and so they invest in different assets of various industries and thats how they are using diversification. While investing in stocks, investors need to monitor the movement of the rate of return on the stock in order to make a better assessment of stocks or a portfolio in which they want to invest. Investing in a portfolio (a collection of securities) is much safer than investing in a single security. Investors are trending to find the optimal portfolio which is located on the efficient frontier in a place where it achieves maximum income while assuming a certain level of risk. Empirical research has shown that the Markowitz model can be successfully applied on the Croatian capital market and that all the shares of the selected sample achieved positive rates of return, although some stocks with the certain rate of risk do not accomplish a share in the portfolio.