ETF Growth and Income Portfolio, January 2023
The ETF Growth and Income Portfolio invests in exchange-traded funds (ETFs) that are diversified among several different equity and income asset classes. The portfolio seeks to provide investors with broad diversification by investing in ETFs which invest in common stocks of various market capitalizations, growth and value styles, sectors and countries as well as taxable bonds. Now, instead of using multiple investments to achieve both income and growth potential, investors may be able to fulfill their investment plans with a single diversified portfolio.
What is Asset Allocation?
Asset allocation is the process of developing a diversified investment portfolio by combining different assets in varying proportions. A portfolio's long-term performance is determined primarily by the distribution of dollars among asset classes. The asset allocation decision is one of the most important decisions you will make as an investor. Studies have found that an asset allocation policy is the number one factor in determining both the return and the risk of an investment portfolio.*
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 income and
above-average 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 common stocks and taxable bonds.
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.
Common stocks are subject to 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 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 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 market or investors’
perception thereof, possible downgrades and defaults of interest and/or principal.
Certain of the funds 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 rates decline.
Certain of the funds invest in senior loans. The yield on
closed-end funds 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 funds 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 funds 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 funds 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.
Securities of non-U.S. issuers are subject to additional risks, including currency fluctuations, political risks, withholding, the lack of adequate financial information, and exchange control restrictions impacting non-U.S. issuers.
The United Kingdom’s official departure from the European Union (commonly referred to as “Brexit”) led to
volatility in global financial markets, in particular those of the United Kingdom and across Europe, and the
weakening in political, regulatory, consumer, corporate and financial confidence in the United Kingdom and
Europe. It is not currently possible to determine the extent of the impact that Brexit may have on the portfolio’s
investments and this uncertainty 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 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 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
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.