FT Income Portfolio, Series 16
Finding the right mix of investments is a key factor to successful investing. Because different investments
often react differently to economic and market changes, the FT Income Portfolio has been developed to
capture both equity and fixed income market dynamics. The FT Income Portfolio is a unit investment trust
which consists of exchange-traded funds (ETFs) advised by First Trust Advisors L.P., an affiliate of the trust’s
sponsor. The portfolio is diversified across both stocks and bonds through First Trust® ETFs that employ
varying investment strategies. By not solely focusing on equities and incorporating a fixed income
component, the portfolio seeks to maximize income while providing capital appreciation potential.
Using a disciplined investment strategy, the FT Income Portfolio includes both equity characteristics and
fixed income characteristics. The equity portion of the portfolio consists of First Trust® ETFs that invest in
common stocks of companies of various market capitalizations, growth and value styles, sectors and
countries. The fixed income portion of the portfolio consists of First Trust® ETFs that invest in varied asset
classes to diversify risk exposure.
What is an ETF?
ETFs offer investors the opportunity to buy and sell an entire basket of securities with a single
transaction throughout the trading day. ETFs combine the characteristics of a mutual fund with the
convenience and trading flexibility of stocks. Below is a list of other ETF features.
Diversification - ETFs hold a basket of securities which helps to mitigate single security
risk. It is important to note that diversification does not guarantee a profit or protect against loss.
Transparency - ETF holdings are available daily so investors know what they own.
Tax Efficiency - The ETF structure allows for increased tax efficiency.
Fully Invested - Unlike a traditional mutual fund, ETFs do not need to hold cash in order to
satisfy investor redemptions which allows them to better adhere to their investment objective.
This unit investment trust seeks monthly income and capital appreciation by investing in a
diversified portfolio of ETFs; 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 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 ETFs which invest in fixed income, equity
securities and options.
ETFs 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 ETFs 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, ETFs
frequently trade at a discount from their net asset value in the secondary market.
Certain of the ETFs 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 ETFs invest in convertible securities. Convertible securities are bonds, preferred stocks and
other securities that pay a fixed rate of interest (or dividends) and will repay principal at a fixed date in the
future. However, these securities may be converted into a specific number of common stocks at a specified
time. As such, an investment in convertible securities entails some of the risks associated with both common
stocks and bonds.
Certain of the ETFs 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 ETFs 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 ETFs invest in mortgage-backed securities. Rising interest rates tend to extend the duration
of mortgage-backed securities, making them more sensitive to changes in interest rates, and may reduce
the market value of the securities. In addition, mortgage-backed securities are subject to prepayment
risk, the risk that borrowers may pay off their mortgages sooner than expected, particularly when interest
Certain of the ETFs invest in preferred securities. Preferred securities are equity securities of the issuing
company which pay income in the form of dividends. Preferred securities are typically subordinated to bonds
and other debt instruments in a company’s capital structure, and therefore will be subject to greater credit
risk than those debt instruments.
Certain of the ETFs invest in senior loans. The yield on ETFs which invest in senior loans will generally decline
in a falling interest rate environment and increase in a rising interest rate environment. Senior loans are
generally below investment grade quality (“junk” bonds). An investment in senior loans involves the risk that
the borrowers may default on their obligations to pay principal or interest when due.
Certain of the ETFs invest in covenant-lite loans which contain fewer or no maintenance covenants and may
hinder the ETF’s ability to reprice credit risk and mitigate potential loss especially during a downturn in the
Certain of the ETFs invest in Treasury Inflation Protected Securities (“TIPS”). TIPS are subject to numerous risks
including changes in interest rates, economic recession and deterioration of the bond market or investors’
Certain of the ETFs invest in U.S. Treasury obligations which are subject to numerous risks including higher
interest rates, economic recession and deterioration of the bond market or investors’ perceptions thereof.
Certain of the ETFs invest in securities of foreign issuers which are
subject to additional risks, including currency fluctuations, political
risks, withholding, the lack of adequate financial information, and
exchange control restrictions impacting foreign issuers.
Approximately 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.
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 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.
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.
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.
For a discussion of additional risks of investing in the trust see
the “Risk Factors” section of the prospectus.