Low Volatility Portfolio, Series 20
The ebb and flow of markets can have a significant impact on a portfolio. For investors focused on long-term
investment objectives, one way to potentially mitigate the adverse effects of market movements is
to invest in relatively low-volatility stocks. Typically, these stocks do not have as dramatic price
fluctuations (relative to other stocks), but change in value steadily over time.
The goal of the Low Volatility Portfolio is to provide investors with exposure to 50 well-capitalized companies
which have displayed low price fluctuations over time while also retaining capital growth potential.
Portfolio Selection Process
Through our multi-factor selection process we seek to find the stocks that we believe have the best
prospects for above-average capital appreciation.
Step 1: Fundamental Model Ranking
All stocks contained in the S&P 500 Index
are ranked by the following equally weighted factors to determine an overall fundamental model rank::
- Price-to-cash flow.
- Return on assets.
Step 2: Volatility Model Ranking
All stocks contained in the S&P
500 Index are ranked by long- and short-term
volatility based on standard deviation of historical
returns in order to determine each stock’s volatility
Step 3: Select Lowest Volatility Stocks
The top 100 stocks in the S&P 500
Index according to their volatility model rank are determined.
Step 4: Select Highest Fundamentally Ranked Stocks
The remaining stocks are ranked based on their fundamental model score and the top 50 stocks are
selected for the portfolio subject to a maximum of 25% in any one sector. Stocks are equally weighted
within the portfolio.
This unit investment trust seeks above-average capital appreciation; however, there is
no assurance the objective will be met.
|Not FDIC Insured Not Bank Guaranteed May Lose Value
You should carefully consider the portfolio's investment objective,
risks, and charges and expenses 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 involved with owning common stocks, 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 securities in the portfolio are issued by Real Estate Investment Trusts (REITs). Companies involved in the real estate industry are subject to changes in the real estate market, vacancy rates and competition, volatile
interest rates and economic recession.
An investment in a portfolio containing equity 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.
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.
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.
The recent outbreak of a respiratory disease designated as COVID-19 was first detected in China in December 2019. The global economic impact of the COVID-19 outbreak is impossible to predict but is expected to disrupt manufacturing, supply chains and sales in affected areas and negatively impact global economic growth prospects. The COVID-19 outbreak has also caused significant volatility and declines in global financial markets, which have caused losses for investors. The impact of the COVID-19 outbreak may be short term or may last for an extended period of time, and in either case could result in a substantial economic downturn or recession.
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.
Although this portfolio terminates in approximately 15 months, the strategy is long-term.
Investors should consider their ability to pursue investing in successive portfolios, if available.
There may be tax consequences unless units are purchased in an IRA or other qualified plan.