ETF Growth and Income Portfolio, April 2012
The ETF Growth and Income Portfolio invests in exchange-traded funds (ETFs) that are diversified among several different equity and income asset classes. The portfolio has been designed to provide investors with broad diversification by investing in ETFs which invest in common stocks of various market capitalizations, growth and value styles, sectors and countries as well as taxable bonds. Now, instead of using multiple investments to achieve both income and growth potential, investors may be able to fulfill their investment plans with a single diversified portfolio.
This unit investment trust seeks income and above-average capital appreciation by investing in a diversified portfolio of ETFs; however, there is no assurance the objectives will be met. We believe this portfolio offers investors the following:
- Potential for capital appreciation.
- Potential for income.
- Diversified exposure to stocks and bonds.
- Reduced volatility compared to an all stock portfolio.
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.
What is Asset Allocation?
Asset allocation is the process of developing a diversified investment portfolio by combining different assets in varying proportions. A portfolio's longterm performance is determined primarily by the distribution of dollars among asset classes. The asset allocation decision is one of the most important decisions you will make as an investor. Studies have found that an asset allocation policy is the number one factor in determining both the return and the risk of an investment 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 benefits of an index mutual fund with the convenience and trading flexibility of stocks. Below is a list of other benefits to investing in ETFs.
- 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
You should consider the portfolio's investment objectives, 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.
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 and taxable bonds.
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.
One of the ETFs invests in 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.
Certain of the ETFs invest in investment grade securities. Investment grade securities are subject to numerous risks including higher interest rates, economic recession, deterioration of the investment grade market or investors' perception thereof, possible downgrades and defaults of interest and/or principal.
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.
Certain of the exchange-traded funds invest in high-yield securities or "junk" bonds. Investing in high-yield securities should be viewed as speculative and you should review your ability to assume the risks associated with investments which utilize such securities. High-yield securities are subject to numerous risks, including higher interest rates, economic recession, deterioration of the junk bond market, possible downgrades and defaults of interest and/or principal. Highyield security prices tend to fluctuate more than higher rated securities and are affected by short-term credit developments to a greater degree.
Certain of the ETFs invest in securities of foreign issuers which are 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.
Certain of the ETFs invest in U.S. Treasury obligations which are subject to numerous risks including higher interest rates, economic recession and deterioration of the bond market or investors' perceptions thereof.
Certain of the ETFs invest in TIPS. TIPS are subject to numerous risks including changes in interest rates, economic recession and deterioration of the bond market or investors' perception thereof.