Diversified High Income Closed-End Portfolio, Series 48
The Multi-Sector Approach
The Diversified High Income Closed-End Portfolio seeks to provide investors with a high rate of current
monthly income by investing across a broad range of high income paying closed-end funds. Because
different sectors follow different cycles and react differently to changes in global economies and interest
rates, spreading assets across this spectrum of closed-end funds has the potential to reduce the overall risk
of the portfolio.
When selecting closed-end funds for this portfolio, we look at several factors
- Discount - We favor funds which are trading
at a discount to net asset value and we favor
those which are trading at a greater discount
relative to their peers.
- Consistent dividend - We favor funds which
have a history of paying a consistent
- Expense ratio - We favor funds which have a
lower than average expense ratio relative to
- Diversification - We limit exposure to
individual fund companies/managers.
- Liquidity - We favor larger funds and more
Unlike open-end mutual funds, closed-end funds maintain a relatively fixed pool
of investment capital. This allows portfolio managers to better 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
The portfolio offers investors diversification by investing in a broad range
of closed-end funds that are further diversified across hundreds of individual
securities. Diversification does not guarantee a profit or protect against loss.
Closed-end funds are structured to generally provide a more stable income stream
than other managed investment products because they are not subjected to cash
inflows and outflows, which can dilute dividends over time. However, stable
income cannot be assured.
This unit investment trust seeks a high rate of current monthly income, with capital
appreciation as a secondary objective by investing in a diversified pool of closed-end
funds. There is, however, no assurance that the objectives of the portfolio will be achieved.
|Not FDIC Insured Not Bank Guaranteed May Lose Value
You should consider the portfolio's investment objective, risks, and
charges and expenses carefully 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 an investment in a portfolio of closed-end funds. Closedend
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. Shares of closed-end funds frequently trade at a discount to their net asset value in the secondary
market and the net asset value of closed-end fund shares may decrease. Certain closed-end funds in which
the portfolio invests employ the use of leverage, which increases the volatility of such funds.
Certain of the closed-end funds invest in common stocks. 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.
Certain of the closed-end funds invest in floating-rate securities.
A floating-rate security is an instrument in which the interest rate
payable on the obligation fluctuates on a periodic basis based upon
changes in an interest rate benchmark. As a result, the yield on such
a security will generally decline in a falling interest rate environment,
causing the trust to experience a reduction in the income it receives
from such securities. Certain of the floating-rate securities pay interest
based on LIBOR. The United Kingdom’s Financial Conduct Authority,
which regulates LIBOR, will cease making LIBOR available as a reference
rate over a phase-out period that will begin immediately after
December 31, 2021. The unavailability or replacement of LIBOR may
affect the value, liquidity or return on certain portfolio investments.
Any potential effects of the transition away from LIBOR can be difficult
to ascertain, and they may vary depending on a variety of factors and
they could result in losses to the portfolio.
Certain of the closed-end 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. High-yield 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 closed-end funds 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.
Certain of the closed-end funds invest in securities issued by foreign issuers. Such securities are subject to
certain risks, including currency and interest rate fluctuations, nationalization or other adverse political
or economic developments, lack of liquidity of certain foreign markets, withholding, the lack of adequate
financial information, and exchange control restrictions impacting foreign issuers.
About one year after the United Kingdom officially departed the European Union (commonly referred to as
“Brexit”), the United Kingdom and the European Union reached a trade agreement that became effective
on December 31, 2020. It is not currently possible to determine the extent of the impact the Brexit trade
agreement may have on the portfolio’s investments and this certainly could negatively impact current and
future economic conditions in the United Kingdom and other countries, which could negatively impact the
value of the portfolio’s investments.
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 cybersecurity.
The COVID-19 global pandemic has caused significant volatility and declines in global financial markets,
causing losses for investors. The development of vaccines has slowed the spread of the virus and allowed
for the resumption of “reasonably” normal business activity in the United States, although many countries
continue to impose lockdown measures. Additionally, there is no guarantee that vaccines will be effective
against emerging variants of the disease.
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.
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
For a discussion of additional risks of investing in the trust see the “Risk Factors” section of