First Trust® ETF Allocation Portfolio, Series 4
Finding the right mix of investments is a key factor to successful investing. Because different investments often react differently to economic and market changes, diversifying among low-correlated investments primarily helps to reduce volatility and also has the potential to enhance your returns. The First Trust® ETF Allocation Portfolio is a unit investment trust which is designed to provide broad equity diversification by investing approximately 70% in exchange-traded funds (ETFs) advised by First Trust Advisors L.P., an affiliate of the trust's sponsor, First Trust Portfolios L.P., that invest in common stocks across various market capitalizations, growth and value styles and sectors. The remaining 30% of the portfolio invests in First Trust ETFs that invest in common stocks of companies from several different sectors of the market that we believe will outperform the overall market over the life of the trust.
Core and Satellite Approach
For decades, investors have implemented asset allocation strategies designed around a core and satellite approach. This is a strategy of investing in broad based equity asset classes which serve as the core component of the portfolio, and enhancing them with satellite positions that are concentrated in specific market segments. The goal of the core and satellite approach is to balance broad diversification while seeking risk-controlled, enhanced performance. We use this approach to construct the First Trust ETF® Allocation Portfolio.
What is an ETF?
ETFs offer investors the opportunity to buy and sell an entire basket of securities with a single transaction throughout the trading day. ETFs combine the characteristics of an index mutual fund with the convenience and trading flexibility of stocks. Below is a list of other features ETFs seek to offer.
- Diversification - ETFs hold a basket of securities which helps to mitigate single security risk. It is
important to note that diversification does not guarantee a profit or protect against loss.
- Transparency - ETF holdings are available daily so investors know what they own.
- Tax Efficiency - The ETF structure allows for increased tax efficiency.
- Fully Invested - Unlike a traditional mutual fund, ETFs do not need to hold cash in order to
satisfy investor redemptions which allows them to better adhere to their investment objective.
| Not FDIC Insured • Not Bank Guaranteed • May Lose Value |
Portfolio Objective
This unit investment trust seeks above-average capital appreciation by investing in a diversified portfolio of First Trust equity ETFs; however, there is no assurance the objective will be met. The portfolio terminates approximately two years from the initial date of deposit.
It is important to note that an investment can be made in the underlying funds directly rather than through the trust. These direct investments can be made without paying the trust's sales charge, operating expenses and organizational costs.
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 ETFs which invest in common stocks.
Common stocks are subject to risks 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.
ETFs are subject to various risks, including management's ability to meet the fund's investment objective, and to manage the fund's portfolio when the underlying securities are redeemed or sold, during periods of market turmoil and as investors' perceptions regarding ETFs or their underlying investments change. Unlike open-end funds, which trade at prices based on a current determination of the fund's net asset value, ETFs frequently trade at a discount from their net asset value in the secondary market.
Certain of the ETFs invest in small-cap companies. Small-cap companies are subject to additional risks, as the share prices of small-cap companies are often more volatile than those of larger companies due to several factors, including limited trading volumes, products, or financial resources, management inexperience and less publicly available information.
An investment in a portfolio containing equity securities of foreign issuers is subject to additional risks, including currency fluctuations, political risks, withholding, the lack of adequate financial information, and exchange control restrictions impacting foreign issuers. Risks associated with investing in foreign securities may be more pronounced in emerging markets where the securities markets are substantially smaller, less liquid, less regulated and more volatile than the U.S. and developed foreign markets.
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.