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Corporate Investment Grade Laddered Portfolio, Series 5

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 subject to annual operating expenses and organization costs. 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.

Portfolio Objectives

The objectives of this unit investment trust are to seek 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.

Portfolio Selection

Our analysts use a multiple factor approach when assessing the credit strength of the corporate bonds that are selected for inclusion in the trust. The analysis includes the issuer's credit rating and financial outlook in conjunction with an evaluation of fundamental characteristics of the issuer which may include leverage, liquidity and profitability as well as industry specific and geographic risk. Factors considered at the security level include an analysis of the issuer's capital structure, the subordination of the security, coupon type, liquidity and the amount of an issue outstanding. These factors in combination with the duration, yield, price, call features and maturity result in an overall determination of relative value.

Portfolio Summary

  • Potential for high current monthly income.
  • Diversified portfolio of investment grade corporate bonds.
  • Estimated weighted average maturity of approximately 6 to 8 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.

Chart

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 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 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.

You should be aware that the portfolio is concentrated in stocks in the financials sector which involves additional risks, including limited diversification. The companies engaged in the financials sector are subject to the adverse effects of volatile interest rates, economic recession, decreases in the availability of capital, increased competition from new entrants in the field, and potential increased regulation.

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 available information.

An investment in a portfolio containing 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.

One of the securities in the trust is issued by a REIT. 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.

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.

 
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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