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Balanced Income Equity and ETF Opportunity Portfolio, Series 2

The Balanced Income Equity and ETF Opportunity Portfolio is a unit investment trust which offers investors a potentially lower-risk alternative to investing solely in stocks. To accomplish this, the portfolio invests approximately 50% in common stocks of dividend-paying companies and approximately 50% in exchange-traded funds (ETFs) which invest primarily in fixed-income securities. Because stocks and bonds may react differently to changes in the economy and interest rates, diversifying assets in this manner has the potential to reduce the overall volatility of the portfolio.

What is Asset Allocation?

Asset allocation is the process of developing a diversified investment portfolio by combining different assets in varying proportions. The asset allocation decision may be one of the most important decisions you can make as an investor.

Effective diversification requires combining various types of securities that may behave differently during changing economic or market conditions. Diversifying your portfolio among stocks and bonds makes you less dependent on the performance of any single asset class.

The Importance of Dividends

  • History shows that, over the long-term, dividends provide a key component of total return. As interest rates remain low, investors are turning their attention to dividend paying stocks.
  • Corporations are not obligated to share their earnings with stockholders, so dividends may be viewed as a sign of a company’s profitability as well as management’s assessment of the future.
  • We believe that companies that distribute dividends on a regular basis generally demonstrate financial strength and positive performance relative to their peers.

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 a mutual fund with the convenience and trading flexibility of stocks. Below is a list of other ETF features.

  • 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.

Portfolio Objectives

This unit investment trust seeks current monthly income and capital appreciation. There is, however, no assurance that the objectives will be achieved. The portfolio terminates approximately two years from the initial date of deposit.

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.

Risk Considerations:

An investment in this unmanaged unit investment trust should be made with an understanding of the risks involved with an investment in a portfolio of common stocks and ETFs.

Common stocks are subject to certain 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 may employ the use of leverage which increases the volatility of such funds.

An investment in a portfolio which includes securities issued by foreign companies should be made with an understanding of the additional risks involved with foreign issuers, such as currency fluctuations, political risk, 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.

All 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 security market or investors' perception thereof, possible downgrades and defaults of interest and/or principal.

All of the ETFs 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. High-yield security prices tend to fluctuate more than higher rated securities and are affected by shortterm credit developments to a greater degree.

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.

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.

Although this portfolio 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.

For a discussion of additional risks of investing in the trust see the "Risk Factors" section of the prospectus.

 
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.
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The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. By providing this information, First Trust is not undertaking to give advice in any fiduciary capacity within the meaning of ERISA and the Internal Revenue Code. First Trust has no knowledge of and has not been provided any information regarding any investor. Financial advisors must determine whether particular investments are appropriate for their clients. First Trust believes the financial advisor is a fiduciary, is capable of evaluating investment risks independently and is responsible for exercising independent judgment with respect to its retirement plan clients.
First Trust Portfolios L.P.  Member SIPC and FINRA.
First Trust Advisors L.P.
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