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Investment Grade Multi-Asset Income Long-Term, 31

Corporate Bond Basics

A corporate bond is a debt obligation issued by a corporation. Issuing bonds can be an alternative to offering equity ownership by issuing stock. Payments to bondholders have priority over payments to stockholders.

Taxable Municipal Bond Basics

A taxable municipal bond is a fixed-income security issued by a local government entity that seeks to raise money to finance private development. The municipality issues taxable municipal bonds when it hopes to attract a business and the jobs it might bring to the area, especially when the business may be otherwise unable to obtain financing. Taxable municipal bonds typically offer yields more comparable to those of other taxable fixed-income securities, such as corporate bonds or bonds issued by U.S. governmental agencies, than to those of tax-exempt municipals.

Why Investment Grade?

Within the bond market, there is a category of bonds considered “investment grade.” Investment grade bonds are rated BBB/Baa or higher by major credit rating agencies. The designation of a bond as investment grade is based upon an evaluation by a credit rating agency of the corporation’s credit history and ability to repay obligations. This rating of investment grade generally signifies that a credit rating agency considers the quality of a particular bond to be sufficient to provide reasonable assurance of the issuer’s ability to meet their obligations to bondholders. There is, however, no assurance that the securities selected for the trust will continue to receive an investment grade rating in the future or that such rating will ensure an issuer’s ability to satisfy its obligations to bondholders.

Investment grade bonds generally are a high credit quality asset class with historically low default rates. The chart to the right illustrates that the average default rates for investment grade bonds have been significantly lower than for speculative grade bonds based on the most recent data available from Moody’s Investors Service. Current default rates may vary from that of their historical averages and there can be no assurance that the default rate for investment grade bonds will not rise in the future.

Portfolio Summary

  • A diversified portfolio of investment grade corporate bonds and taxable municipal bonds.
  • Estimated weighted average maturity of approximately 25 to 30 years.
  • Minimum call protection of approximately 5 years.
  • 3.50% up-front maximum sales charge. In addition to the sales charge, the trust is subject to annual operating expenses and organization costs.

Portfolio Objectives

This unit investment trust seeks current income and capital preservation by investing in a diversified portfolio of investment grade corporate and taxable municipal bonds. There is, however, no assurance that the objectives will be achieved.

Chart

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.

Risk Considerations:
An investment in this unmanaged unit investment trust should be made with an understanding of the risks associated with both investment grade corporate bonds and taxable municipal bonds. These bonds are subject to numerous risks including rising interest rates, economic recession, deterioration of the corporate or municipal bond market, possible downgrades, increased volatility, reduced liquidity and defaults of interest and/or principal.

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.

One of the securities held by the trust is issued by a foreign entity. 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.

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 cyber security.

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. The markets for credit instruments, including corporate and municipal securities, have experienced periods of extreme illiquidity and volatility.

 
The information in the prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. The prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
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The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. By providing this information, First Trust is not undertaking to give advice in any fiduciary capacity within the meaning of ERISA, the Internal Revenue Code or any other regulatory framework. Financial advisors are responsible for evaluating investment risks independently and for exercising independent judgment in determining whether investments are appropriate for their clients.
First Trust Portfolios L.P.  Member SIPC and FINRA.
First Trust Advisors L.P.
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