Low Volatility Portfolio, Series 31
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 consider the portfolio's investment objectives, risks, and
charges and expenses carefully before investing. Contact your financial professional
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.
The S&P 500 Index is an unmanaged index of 500 companies used to measure large-cap U.S. stock market performance. The index cannot be purchased directly by investors.
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 trust 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.
Securities of non-U.S. issuers are subject to additional risks, including currency fluctuations, political risks, withholding, the lack of adequate financial information, and exchange control restrictions impacting non-U.S. issuers.
An investment in a portfolio containing mid-cap companies is subject to additional risks, as the share prices of 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.
Large capitalization companies may grow at a slower rate than the overall market.
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.
In February 2022, Russia invaded Ukraine which has caused and could continue to cause significant market disruptions and volatility within the markets in Russia, Europe, and the United States. The hostilities and sanctions resulting from those hostilities could have a significant impact on certain investments as well as performance.
The COVID-19 global pandemic and the ensuing policies enacted by governments and central banks have
caused and may continue to cause significant volatility and uncertainty in global financial markets. While
the U.S. has resumed “reasonably” normal business activity, many countries continue to impose lockdown
measures. Additionally, there is no guarantee that vaccines will be effective against emerging variants of
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.