FM Global Invest Risk-Reward Rating
At FM Global Invest, we take a disciplined, research-driven approach to long-term investing. At the heart of our methodology lies the FM Global Invest Risk-Reward Rating — a proprietary framework designed to identify high-quality companies with particularly attractive risk-reward profiles.
Our rating system generates a weighted score between 0% and 100%. The higher the score, the more compelling the company’s overall risk-reward profile.
By identifying companies with especially favorable risk-reward dynamics, we increase the probability of achieving positive investment outcomes. At the same time, the system helps us avoid companies with disproportionately high risks and low return potential — protecting capital and improving portfolio resilience.
This rating system allows us to systematically assess a company’s ability to:
generate sustainable income,
deliver long-term growth, and
preserve capital through market cycles.
Our goal is to help investors build portfolios that produce strong risk-adjusted returns over the long term.
By evaluating companies not only on their income potential or growth outlook but also on the balance between opportunity and risk, this framework supports informed investment decisions and strategic portfolio construction — aligned with the principles of diversification, quality, and prudent risk management.
It also plays a key role in identifying companies that align with the strategic principles behind The Dividend Income Accelerator Portfolio, our actively managed dividend strategy focused on sustainable income and long-term capital appreciation.
Investor Benefits
The FM Global Invest Risk-Reward Rating functions as a filtering system, identifying companies that are most attractive in terms of risk and reward.
Most companies fall into the Strong Sell category, with progressively fewer qualifying as Sell, Hold, or Buy — and only a select few reaching Strong Buy.
As the score increases, the number of qualifying companies decreases — highlighting the selective nature of our system in identifying top-tier investment opportunities with especially attractive risk-reward profiles.
| Score | Risk-Reward Evaluation | Rating | Recommended Action |
| 0%–19% | Very Unattractive in terms of risk and reward | Strong Sell
| Exit the position entirely. |
| 20%–39% | Unattractive in terms of risk and reward | Sell
| Reduce your allocation to less than 1% of your portfolio. |
| 40%–59% | Moderately attractive in terms of risk and reward | Hold | Maintain your current position, but limit it to no more than 2% of your portfolio. |
| 60%–79% | Attractive in terms of risk and reward | Buy | Consider increasing your position to up to 3% of your portfolio. |
| 80%–100% | Very attractive in terms of risk and reward | Strong Buy | Accumulate shares and overweight the position, with a maximum allocation of 5% of your portfolio. |
Note: These recommendations are general guidelines based on the FM Global Invest Risk-Reward Rating and are intended to support diversified, risk-conscious portfolio construction. Final allocation decisions should also reflect your personal investment goals, risk tolerance, and broader portfolio strategy.
What Does the FM Global Invest Risk-Reward Rating Measure?
The FM Global Invest Risk-Reward Rating evaluates companies across 10 carefully weighted categories, using 35 individual quantitative and qualitative criteria. Each company is scored on a standardized scale from 0 to 5 in every subcategory, with final results weighted based on their significance to long-term investor outcomes.
Key Categories of the FM Global Invest Risk-Reward Rating
| Characteristic | Description |
| Business Model Quality | Measures the robustness of the company’s core operations, including pricing power, customer retention, and revenue diversification. |
| Economic Moat & Competitive Advantage | Assesses the strength and durability of competitive advantages through brand value, moat depth, and forward-looking positioning. |
| Financial Strength | Analyzes balance sheet quality, profitability, free cash flow, and credit ratings to ensure financial resilience. |
| Dividend Sustainability | Evaluates dividend yield, growth, payout ratio, and safety—key to generating consistent, inflation-resistant income streams. |
| Management & Capital Allocation | Reviews the quality of management and how efficiently capital is deployed for shareholder value creation. |
| Risk Exposure | Factors in macroeconomic and geopolitical risks, recession resilience, currency exposure, and stock volatility. |
| Valuation | Uses a combination of intrinsic (DCF-based) and relative valuation methods to determine upside potential. |
| Innovation & Disruption | Scores the company’s capacity for innovation and its potential to lead or benefit from structural changes in its industry. |
| Growth Outlook | Measures historical and projected growth in EBIT, EPS, and free cash flow per share. |
| Expected Return | Integrates all relevant inputs into a projected Internal Rate of Return (IRR), following the valuation methodology of our DCF Model, supporting forward-looking investment decisions. |
Why We Developed the FM Global Invest Risk-Reward Rating
In today’s complex and fast-moving markets, investors are often overwhelmed by an avalanche of data, metrics, and opinions. With so many signals competing for attention, it becomes increasingly difficult to separate what truly matters from the noise.
At FM Global Invest, we believe that clarity leads to better decision-making. That’s why we’ve streamlined the investment evaluation process to focus on the 35 most essential factors — the ones that truly make a difference when it comes to balancing risk and reward. These criteria enable us to evaluate a company’s business durability, financial strength, and potential for long-term value creation.
The FM Global Invest Risk-Reward Rating transforms complexity into structure, enabling us to identify high-conviction opportunities and construct portfolios designed to deliver reliable income, growing dividends, and strong risk-adjusted returns over time.
How we Apply the FM Global Invest Risk-Reward Rating to Evaluate Individual Companies
Discover how we apply the FM Global Invest Risk-Reward Rating to construct globally diversified portfolios, built for sustainable income and strong risk-adjusted returns.
- Discover the rating of Allianz based on the FM Global Invest Risk-Reward Rating.
- Explore LVMH’s score according to our rating system.
- Read how we rate PepsiCo based on the FM Global Invest Risk-Reward Rating
The Methodology of the FM Global Invest Risk-Reward Rating to Evaluate ETFs
Here you can find a detailed explanation of the methodology of the FM Global Invest-Risk-Reward Rating to evaluate ETFs.
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