Investment Grade Multi-Asset Income, 10-20 Year, Series 38
The First Trust Investment Grade Multi-Asset Income Portfolio, 10-20 Year Series
This unit investment trust seeks current income and capital preservation by investing in a diversified portfolio of investment grade corporate and taxable municipal bonds. There is, however, no assurance that the objectives will be achieved.
- A diversified portfolio of investment grade corporate bonds and taxable municipal bonds
- Estimated weighted average maturity of approximately 10 to 20 years
- Minimum call protection of approximately 5 years
- 3.50% up-front maximum sales charge
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.
Taxable Municipal Bond Basics
A taxable municipal bond is a fixed-income security issued by a local government entity that seeks to raise money to finance private development. The municipality issues taxable municipal bonds when it hopes to attract a business and the jobs it might bring to the area, especially when the business may be otherwise unable to obtain financing. Taxable municipal bonds typically offer yields more comparable to those of other taxable fixed-income securities, such as corporate bonds or bonds issued by U.S. governmental agencies, than to those of taxexempt municipals.
Why Investment Grade?
Within the bond market, there is a category of bonds considered "investment grade." Investment grade 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.
| 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 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.
An investment in this unmanaged unit investment trust should be made with an understanding of the risks associated with both investment grade
corporate bonds and taxable municipal bonds. These bonds are subject to numerous risks including rising interest rates, economic recession, deterioration
of the corporate or municipal bond market, possible downgrades, increased volatility, reduced liquidity and defaults of interest and/or principal.
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. Risks associated with investing in
foreign securities may be more pronounced in emerging markets where the securities markets are substantially smaller, less liquid, less regulated and
more volatile than the U.S. and developed foreign markets.
Certain of the securities in the trust are covered by insurance policies obtained by the issuers or
underwriters of the bonds from insurance companies. There can be no assurance that any insurer
will be able to satisfy its commitments in the event claims are made in the future.
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 markets for credit instruments, including corporate and municipal securities, have experienced periods of extreme illiquidity and volatility.
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.