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January Effect Portfolio, Series 8

An important part of many investors' overall strategy is to minimize taxes. As the end of the year approaches, investors with securities in taxable accounts typically review their portfolio for potential tax losses. Historically, when tax-motivated selling pressures occur in December, closed-end fund (CEF) discounts can widen further.

Portfolio Objectives

This unit investment trust seeks current income, with total return as a secondary objective. There is, however, no assurance that the objectives will be achieved.

Portfolio Selection Criteria

The January Effect Portfolio is a unit investment trust which invests in CEFs that we believe may benefit once tax-motivated selling pressures abate after the end of the year. The trust invests in taxable CEFs which meet the following criteria:

  • Price Decline – Price decline of 10% or greater from each CEF's 2018 high at the time the portfolio is selected.


  • Discount to NAV – We select funds which are trading at a discount to net asset value and we favor those which are trading at a greater discount relative to their peers.


  • Liquidity – A fund's overall size must be considered, as well as its average trading volume. We favor larger funds and funds with higher trading volume.


  • Dividend Yield – We look for funds with higher dividend yields relative to comparable funds, as well as those that have shown a relatively stable payment level over time.


  • Diversification – In order to cover the broadest scope of the market, we diversify among fund companies and categories. Diversification does not guarantee a profit or protect against loss.
  • 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 closed-end funds. Closed-end funds 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 the funds or their underlying investments change. Shares of closed-end funds frequently trade at a discount to their net asset value in the secondary market and the net asset value of closed-end fund shares may decrease. Certain closedend funds may employ the use of leverage which increases the volatility of such funds.

    Certain of the closed-end funds invest in common stocks. 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 closed-end funds invest in floating-rate securities. A floating-rate security is an instrument in which the interest rate payable on the obligation fluctuates on a periodic basis based upon changes in an interest rate benchmark. As a result, the yield on such a security will generally decline in a falling interest rate environment, causing the trust to experience a reduction in the income it receives from such securities.

    Certain of the closed-end 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 closed-end 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 closed-end funds invest in MLPs. Investments in MLPs are subject to the risks generally applicable to companies in the energy and natural resources sectors, including commodity pricing risk, supply and demand risk, depletion risk and exploration risk. U.S. taxing authorities could challenge the trust's treatment of the MLPs for federal income tax purposes. These tax risks could have a negative impact on the after-tax income available for distribution by the MLPs and/or the value of the trust's investments.

    Certain of the closed-end funds included in the portfolio 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 closed-end 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 closed-end funds invest in securities issued by foreign issuers. Such securities are subject to risks, including currency and interest rate fluctuations, 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.

    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 available information.

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

 
The information in the prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. The prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
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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.
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