January Effect Portfolio, Series 9
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 2019 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 convertible securities.
Convertible securities are bonds, preferred stocks and other
securities that pay a fixed rate of interest (or dividends) and will
repay principal at a fixed date in the future. However, these
securities may be converted into a specific number of common
stocks at a specified time. As such, an investment in convertible
securities entails some of the risks associated with both common
stocks and bonds.
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 Master Limited
Partnerships (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 invest in call options. An option’s
value may be adversely affected if the market for the option
becomes less liquid or smaller. In addition, options will be
affected by changes in the value and dividend rates of the stock
subject to the option, an increase in interest rates, a change in
the actual and perceived volatility of the stock market and the
common stock and the remaining time to expiration.
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 covenant-lite loans which
contain fewer or no maintenance covenants and may hinder the
closed-end funds’ ability to reprice credit risk and mitigate
potential loss especially during a downturn in the credit cycle.
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. Risks associated with investing in foreign
securities may be more pronounced in emerging markets where the securities markets are
substantially smaller, less developed, less liquid, less regulated, and more volatile than the U.S.
and developed foreign markets.
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
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
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.
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.
For a discussion of additional risks of investing in the trust see the “Risk Factors” section of