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Investment Grade Select Closed-End and ETF Portfolio, Series 4

The Investment Grade Select Closed-End and ETF Portfolio seeks to provide investors with current monthly income and diversification by investing across a broad range of closed-end funds (CEFs) and exchange-traded funds (ETFs) which have an average credit rating that is investment grade.

When selecting funds for this portfolio, we generally look at several factors including:

  • Premium or discount – we favor funds which are trading at a discount to net asset value.

  • Consistent dividend – we favor funds which have a history of paying a consistent dividend.

  • Expense ratio – we favor funds which have a lower than average expense ratio relative to their peers.

  • Diversification – we limit exposure to individual fund companies/managers.

  • Liquidity – we favor funds which have higher daily trading volume.

  • Size – we favor funds which have a larger market capacity. Funds with a larger market capacity typically are more liquid and may benefit investors in that we are able to buy and sell shares without materially affecting the market price.

Why Investment Grade

Within the debt securities market, there is a category of securities considered "investment grade." Investment grade securities are rated BBB/Baa or higher by major credit rating agencies. The investment grade designation is based upon an evaluation by a credit rating agency of the debt issuer'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 security to be sufficient to provide reasonable assurance of the issuer's ability to meet their obligations to debt holders.

Investment grade securities are generally a high credit quality asset class with historically low default rates. Current default rates may vary from that of their historical averages and there can be no assurance that the default rate for investment grade securities will not rise in the future.

Diversification Advantage

Investing in both CEFs and ETFs provides an efficient way to achieve diversification across investment grade securities. The broad range of CEFs and ETFs in which the portfolio invests are further diversified across hundreds of individual issues. It is important to note that diversification does not guarantee a profit or protect against loss.

Portfolio Objectives

This unit investment trust seeks current monthly income, with capital appreciation as a secondary objective; 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 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.

Risk Considerations:
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 CEFs and ETFs.

CEFs and 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, CEFs 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 and CEFs frequently trade at a discount from their net asset value in the secondary market. Certain of the funds in which the portfolio invests may employ the use of leverage, which increases the volatility of such funds.

All 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 security market or investors' perception thereof, possible downgrades and defaults of interest and/or principal.

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 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. 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 funds 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 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.

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 qualified plan.

For a discussion of additional risks of investing in the trust see the "Risk Factors" section of the prospectus.

 
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The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. By providing this information, First Trust is not undertaking to give advice in any fiduciary capacity within the meaning of ERISA and the Internal Revenue Code. First Trust has no knowledge of and has not been provided any information regarding any investor. Financial advisors must determine whether particular investments are appropriate for their clients. First Trust believes the financial advisor is a fiduciary, is capable of evaluating investment risks independently and is responsible for exercising independent judgment with respect to its retirement plan clients.
First Trust Portfolios L.P.  Member SIPC and FINRA.
First Trust Advisors L.P.
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