Dorsey Wright Relative Strength Dividend, Series 40
Dorsey, Wright & Associates (DWA) is a registered investment advisory firm whose business includes
- Professional management of equity
portfolios for investors.
- Investment research services for numerous broker/dealers and large institutions around the world.
The cornerstone of their approach is technical analysis, and in particular, the law of supply and demand,
which gives them the discipline to make timely investment decisions. In their analysis, relative strength
plays a very important role. To put it simply, relative strength is a measure of a stock’s performance in
relation to its peers. DWA believes it has refined its relative strength investment approach, creating a
valuable and robust tool for stock selection that relies on unbiased, unemotional and objective data.
The Dorsey Wright Relative Strength Dividend Portfolio is a unit investment trust which invests in stocks
selected by DWA using their proprietary investment process and is designed to be held over the fixed 15-month term of the trust.
The Importance of Dividends
Dividends have historically been one of the few constants in the world of investing, and they
have had a significant impact on stock performance, contributing nearly half of the stock market’s
total return. According to Ibbotson Associates, dividends have provided approximately 41% of the
10.20% average annual total return on the S&P 500 Index from 1926 through 2019. Of course,
past performance is no guarantee of future results.
Portfolio Selection Process
Through the selection process, DWA seeks to identify those companies that they believe will meet the dividend objective of the portfolio.
Identify the Universe
The first step in the selection process is to identify the universe of stocks from which the portfolio is selected. DWA begins with the companies listed in the S&P 900 Index.
Measure Relative Strength Ratings
All of the securities in the universe are scored on several measures of relative strength. These measures rank securities based on intermediate-term price performance relative to a broad market benchmark, and relative to the other securities in the universe. Each security is given a score that allows DWA to determine where it ranks relative to all other securities in the universe with no subjectivity. Each security must meet a minimum relative strength ranking score to be eligible for inclusion in the portfolio.
Determine the Portfolio's Sector Weighting Exposure
The next step in the process is to determine the portfolio's sector exposure. The sector weightings are determined by a combination of current market weights, the relative strength ranking and those with the highest dividend yield of the securities within each sector. The goal is to achieve a portfolio of high relative strength securities with an overall sector weighting close to current market weights.
Select the Portfolio
The final step is to select the top 50 companies for the portfolio based on a combination of relative strength and dividend yield. The stocks are equally
weighted within the portfolio.
This unit investment trust seeks above-average total return through a combination of capital appreciation and dividend income; however, there is no assurance the objective 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 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 involved with owning common stocks, 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 securities in the trust are issued by 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.
One of the securities held by the trust is issued by a foreign entity. An investment in a portfolio containing
equity 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
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
Large capitalization companies may grow at a slower rate than the overall market.
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 recent outbreak of a respiratory disease designated as COVID-19 was first detected in China in December
2019. The global economic impact of the COVID-19 outbreak is impossible to predict but is expected to
disrupt manufacturing, supply chains and sales in affected areas and negatively impact global economic
growth prospects. The COVID-19 outbreak has also caused significant volatility and declines in global
financial markets, which have caused losses for investors. The impact of the COVID-19 outbreak may be short
term or may last for an extended period of time, and in either case could result in a substantial economic
downturn or recession.
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.
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.