Market Strength Allocation Select Portfolio, Series 40
Determining which areas of the market provide the best investment opportunities can be a daunting
task and sometimes economic climates break with tradition, making investment decisions even more
arduous. These situations have historically offered opportunities for patient shareholders to increase
their exposure in great companies.
Our goal with the Market Strength Allocation Select Portfolio is to invest in undervalued companies with
strong market positions that have the following qualities:
- Strong balance sheets;
- Skilled management;
- Highly liquid;
- Ability to generate earnings growth; and
- Record of financial strength and profit growth.
This unit investment trust seeks above-average capital appreciation; however, there is
no assurance the objective will be met.
Portfolio Selection Process
This unit investment trust
invests in a diversified
portfolio of common stocks of
companies that exhibit
financial strength from five
distinct segments of the
market. The five market segments are weighted based on the adjacent allocation.
Through our selection process we seek to find the companies that we believe have the best prospects for
above-average capital appreciation.
Identify the universe
The first step in our selection process is to identify each universe from which
we will select the stocks for the five market segments. Each universe contains
stocks selected specifically for each component of the allocation.
Screen for financial strength
The next step in our process is to evaluate companies based on multiple factors. These
factors are designed to identify those stocks which exhibit strong fundamental
characteristics and to eliminate those that do not meet our investment criteria.
Examine historical financial results
The next step in our process is to look for those companies that have earned
a net cash flow return on investment that is above the average of their peers. Historically,
companies that have increased their cash flows at a higher rate have rewarded
shareholders with superior total returns.
Select companies with attractive valuations
The final step in our process is to select companies based on the fundamental
analysis of our team of research analysts. The stocks selected for the portfolio
are those that meet our investment objective, trade at attractive valuations
and, in our opinion, are likely to exceed market expectations of future cash
|Not FDIC Insured Not Bank Guaranteed May Lose Value
You should consider the portfolio's investment objective, 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 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.
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. Risks associated with investing in foreign securities may be more pronounced
in emerging markets where the securities markets are substantially smaller, 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 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
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.
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 qualified plan.