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