Equity Closed-End Portfolio, Series 55
When it comes to investing for income, investors have several choices. Even with all the options, there
are those investors who do not want to give up the growth potential offered by stocks in order to earn a
high rate of current income. The Equity Closed-End Portfolio has been developed to address this need.
The Equity Closed-End Portfolio is a unit investment trust that is comprised of a pool of closed-end funds
which invest in dividend-paying equity securities.
The Importance of Dividends
Due to the fact that corporations are not obligated to share their earnings with stockholders, dividends
may be viewed as a sign of a company’s profitability as well as management’s assessment of the future,
in our opinion. Dividends have had a significant impact on stock performance. Consider the historical
effect dividends have had on companies in the S&P 500 Index. According to Ibbotson Associates,
dividends have provided approximately 42% of the 9.99% average annual total return on the S&P 500
Index from 1926 through 2018. The S&P 500 Index is an unmanaged index of 500 stocks used to measure
large-cap U.S. stock market performance. The index cannot be purchased directly by investors.
Why Closed-End Funds?
Since closed-end funds maintain a relatively fixed pool of investment capital, portfolio managers are
better able to adhere to their investment philosophies through greater flexibility and control. In addition,
closed-end funds don’t have to manage fund liquidity to meet potentially large redemptions.
Because they are not subjected to cash inflows and outflows, which can dilute distributions over time,
closed-end funds can generally provide a more stable income stream than other managed investment
products. However, stable income cannot be assured.
This unit investment trust seeks high current income, with total return as a
secondary objective by investing in a well-diversified pool of closed-end funds that
invest in dividend-paying equity securities; however, there is no assurance the
objectives will be met.
|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 associated with an investment in a portfolio of closed-end
funds which invest in common stocks.
Closed-end funds 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 the funds 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, closed-end funds frequently trade at a
discount to their net asset value in the secondary market.
Certain closed-end funds employ the use of leverage, which
increases the volatility of such funds.
All of the closed-end funds 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
Certain of the closed-end funds invest in master limited
partnerships (MLPs). Investments in MLPs are subject to the risks
generally applicable to companies in the energy and natural
resources sectors, including commodity pricing risk, supply and
demand risk, depletion risk and exploration risk. U.S. taxing
authorities could challenge the trust’s treatment of the MLPs for
federal income tax purposes. These tax risks could have a
negative impact on the after-tax income available for distribution
by the MLPs and/or the value of the trust’s investments.
Certain of the closed-end funds invest in options. Options are
subject to various risks including that their value may be
adversely affected if the market for the option becomes less
liquid or smaller. In addition, options will be affected by changes
in the value and dividend rates of the stock subject to the
option, an increase in interest rates, a change in the actual and
perceived volatility of the stock market and the common stock
and the remaining time to expiration.
Certain of the closed-end funds invest in 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.
Certain of the closed-end funds invest in
securities of foreign issuers. Foreign securities 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 developed, less liquid, less regulated, and more volatile than the U.S. and developed
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
This UIT is a buy and hold strategy and investors should consider
their ability to hold the trust until maturity. There may be tax
consequences unless units are purchased in an IRA or other
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.
As the use of Internet technology has become more prevalent in
the course of business, the trust has become more susceptible to
potential operational risks through breaches in cyber security.
For a discussion of additional risks of investing in the trust see
the “Risk Factors” section of the prospectus.