Home   Logon   Mobile Site   Research and Commentary   About Us   Call 1.800.621.1675 or Email Us       Follow Us: 

Search by Ticker, Keyword or CUSIP       
 
 


 

Diversified Equity Strategic Allocation Portfolio, 2nd Quarter 2017 Series

The Diversified Equity Strategic Allocation Portfolio is a unit investment trust that has been developed to provide investors with asset allocation, diversification, and an annual rebalancing opportunity through a single investment.

Weighing your risk tolerance as well as the investment return you want is very important. Discussing these factors, among others, with a financial advisor can help you select one of the Strategic Allocation Portfolios that best suits your needs.

The Importance of Asset Allocation

Perhaps the most important investment decision is not the specific investments that are selected, but it's the manner in which the assets are allocated. Asset allocation is the process of developing a diversified investment portfolio by combining different assets in varying proportions. Spreading capital across a range of investments within each major asset class makes your portfolio less dependent on the performance of any single type of investment. Studies have shown that the number one factor contributing to a portfolio's performance is asset class selection and not security selection.*


Chart

Why Diversify?

Diversification makes your portfolio less dependent on the performance of any single asset class. The adjacent chart illustrates the annual performance of various asset classes in relation to one another over the past 20 years as well as a diversified portfolio consisting of an evenly-weighted combination of the asset classes. As you can see, the performance of any given asset class can have drastic changes from year to year making it nearly impossible, even for the most astute investors, to accurately predict the best combination of asset classes to maximize returns and minimize risk. It is important to keep in mind that diversification does not guarantee a profit or protect against loss.


Chart

 

The Relationship Between Risk and Return of Stocks & Bonds

As risk increases in an investment portfolio so do the return expectations. Investors can manage their risk tolerance through asset allocation and by selecting investments that meet their risk/return expectations. Effective asset allocation requires combining assets with low correlations—that is, those that have performed differently over varying market conditions. Investing in assets with low to negative correlation can reduce the overall volatility and risk within your portfolio and may also help to improve portfolio performance. The adjacent chart illustrates the effects of low correlation on the risk and return of varying combinations of stocks and bonds.

Return is measured by average annual total return and risk is measured by standard deviation for the 30 year period from 1987 to 2016. Standard deviation is a measure of price variability. The higher the standard deviation, the greater the variability (and thus risk) of the investment returns.


Chart

Not FDIC Insured • Not Bank Guaranteed • May Lose Value

Mountain Chart

Standard Deviations* Average Annual Total Returns*
S&P 1500 Index Strategy S&P 1500 Index Strategy
Since 1996 15.19% 13.29% 8.64% 9.72%
20 years 15.38% 13.45% 8.00% 9.43%
15 years 14.51% 12.93% 7.05% 8.32%
10 years 15.51% 13.88% 7.19% 6.75%
5 years 10.44% 9.48% 14.75% 12.20%
3 years 10.81% 9.46% 8.87% 7.72%
*Through 12/30/16


Annual Total Returns
Year S&P 1500 Index Strategy
1996 22.30% 14.52%
1997 32.93% 27.60%
1998 26.32% 14.23%
1999 20.24% 21.38%
2000 -6.96% 4.20%
2001 -10.63% -0.80%
2002 -21.30% -11.32%
2003 29.55% 29.09%
2004 11.76% 18.57%
2005 5.65% 13.79%
2006 15.31% 11.73%
2007 5.53% 11.33%
2008 -36.72% -32.53%
2009 27.24% 23.87%
2010 16.39% 13.39%
2011 1.72% 2.43%
2012 16.13% 7.99%
2013 32.77% 31.72%
2014 13.05% 12.98%
2015 1.01% 1.63%
2016 12.99% 9.97%
02/28/17 5.66% 1.49%

Past performance is no guarantee of future results and the actual current performance of the portfolio may be lower or higher than the hypothetical performance of the strategy. Hypothetical returns for the strategy in certain years were significantly higher than the returns of the S&P 1500. Hypothetical strategy returns were the result of certain market factors and events which may not be replicated in the future. You can obtain performance information which is current through the most recent month-end by calling First Trust Portfolios L.P. at 1-800-621-1675 option 2. Investment return and principal value of the portfolio will fluctuate causing units of the portfolio, when redeemed, to be worth more or less than their original cost.

Simulated strategy returns are hypothetical, meaning that they do not represent actual trading, and, thus, may not reflect material economic and market factors, such as liquidity constraints, that may have had an impact on actual decision making. The hypothetical performance is the retroactive application of the strategy designed with the full benefit of hindsight. Strategy returns reflect a sales charge of 2.95% in the first year, 1.95% in subsequent years, estimated annual operating expenses of 0.187%, plus organization costs, but not taxes or commissions paid by the portfolio to purchase securities. Strategy returns assume that dividends are reinvested semi-annually while index returns assume dividends are reinvested monthly. Actual portfolio performance will vary from that of investing in the strategy stocks because it may not be invested equally in these stocks and may not be fully invested at all times. It is important to note that the strategy may underperform the S&P 1500 Index in certain years and may produce negative results.

The S&P 1500 Index is an unmanaged index of 1500 stocks representing the large cap, mid cap and small cap segments of the U.S. equity market.The index cannot be purchased directly by investors.

Standard Deviation is a measure of price variability (risk). A higher degree of variability indicates more volatility and therefore greater risk.

You should consider the portfolio's investment objective, risks, and charges and expenses carefully before investing. Contact your financial advisor or call First Trust Portfolios, L.P. at 1.800.621.1675 to request a prospectus, which contains this and other information about the portfolio. Read it carefully before you invest.

Risk Considerations:

An investment in this unmanaged unit investment trust should be made with an understanding of the risks involved with owning common stocks, such as an economic recession and the possible deterioration of either the financial condition of the issuers of the equity securities or the general condition of the stock market.

You should be aware that the portfolio is concentrated in stocks in the consumer products sector which involves additional risks, including limited diversification. The companies engaged in the consumer products industry are subject to global competition, changing government regulations and trade policies, currency fluctuations, and the financial and political risks inherent in producing products for foreign markets.

An investment in a portfolio containing small-cap and mid-cap companies is subject to additional risks, as the share prices of small-cap companies and certain mid-cap companies are often more volatile than those of larger companies due to several factors, including limited trading volumes, products, financial resources, management inexperience and less publicly available information.

An investment in foreign securities should be made with an understanding of the additional risks involved with foreign issuers, such as currency and interest rate fluctuations, nationalization or other adverse political or economic developments, lack of liquidity of certain foreign markets, withholding, the lack of adequate financial information, and exchange control restrictions impacting foreign issuers.

Certain of the securities in the portfolio are issued by Real Estate Investment Trusts (REITs). Companies involved in the real estate industry are subject to changes in the real estate market, vacancy rates and competition, volatile interest rates and economic recession.

The value of the securities held by the trust may be subject to steep declines or increased volatility due to changes in performance or perception of the issuers.

Although this unit investment trust terminates in approximately 15 months, the strategy is long-term. Investors should consider their ability to pursue investing in successive portfolios, if available.There may be tax consequences unless units are purchased in an IRA or other qualified plan.

 
The information in the prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. The prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted
Printer Friendly Page Printer Friendly Page
 
First Trust Portfolios L.P.  Member SIPC and FINRA.
First Trust Advisors L.P.
Home |  Important Legal Information |  Privacy Policy |  Business Continuity Plan |  FINRA BrokerCheck
Copyright © 2017 All rights reserved.