Corporate Investment Grade Laddered Portfolio, Series 20
Corporate Bond Basics
A corporate bond is a debt obligation issued by a corporation. Issuing bonds can be an alternative to offering
equity ownership by issuing stock. Payments to bondholders have priority over payments to stockholders.
Why Investment Grade
Within the bond market, there is a category of bonds considered “investment grade.” Investment grade
bonds are rated BBB/Baa or higher by major credit rating agencies. The designation of a bond as
investment grade is based upon an evaluation by a credit rating agency of the corporation’s credit
history and ability to repay obligations. This rating of investment grade generally signifies that a credit
rating agency considers the quality of a particular bond to be sufficient to provide reasonable assurance
of the issuer’s ability to meet their obligations to bondholders. There is, however, no assurance that the
securities selected for the trust will continue to receive an investment grade rating in the future or that
such rating will ensure an issuer’s ability to satisfy its obligations to bondholders.
Investment grade bonds generally are a high credit quality asset class with historically low default rates.
The chart to the right illustrates that the average default rates for investment grade bonds have been
significantly lower than for speculative grade bonds based on the most recent data available from
Moody’s Investors Service. Current default rates may vary from that of their historical averages and there
can be no assurance that the default rate for investment grade bonds will not rise in the future.
What Is A Bond Ladder?
A bond ladder is a portfolio of fixed-income securities that mature at regular intervals across a
chosen maturity range. The purpose of a laddered portfolio is to generate a more predictable
income stream with the potential to minimize interest rate risk by holding both short-term and
long-term securities. The Corporate Investment Grade Laddered portfolio is comprised of five
distinct groupings of corporate bond securities with maturities beginning approximately two
years after the initial date of deposit. The portfolio is designed to return approximately 20% of
your principal beginning approximately two years after the initial date of deposit and thereafter
approximately 20% of your principal every two years.
- Potential for high current monthly income.
- Diversified portfolio of investment grade corporate bonds.
- Estimated weighted average maturity of approximately 5 to 7 years.
- 2.50% up-front maximum sales charge. In addition to the sales charge, the trust is
subject to annual operating expenses and organization costs.
The objectives of this unit investment trust are to distribute high current monthly
income and to preserve capital by investing in a laddered portfolio of investment grade
corporate bonds. There is, however, no assurance that the objectives will be achieved.
|Not FDIC Insured Not Bank Guaranteed May Lose Value
You should carefully consider the portfolio's investment objectives,
risks, and charges and expenses before investing. Contact your financial professional
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 investment grade
corporate bonds, including higher interest rates, economic
recession, deterioration of the bond market or investors’
perception thereof, possible downgrades and defaults of
interest and/or principal.
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 qualified plan.
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.
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
In February 2022, Russia invaded Ukraine which has caused and could continue to cause significant market disruptions and volatility within the markets in Russia, Europe, and the United States. The hostilities and sanctions resulting from those hostilities could have a significant impact on certain investments as well as performance.
The COVID-19 global pandemic and the ensuing policies enacted by governments and central banks have caused and may continue to cause significant volatility and uncertainty in global financial markets. While the U.S. has
resumed “reasonably” normal business activity, many countries continue to impose lockdown measures. Additionally, there is no guarantee that vaccines will be effective against emerging variants of the disease.