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Precious Metals Select Portfolio, Series 43

The world of precious metals is a rapidly changing, dynamic market that can be affected by a multitude of domestic and geopolitical forces. Mining technology, supply and demand factors, and inflation all combine to impact how the precious metals market will ultimately move. Furthermore, the various components of the precious metals market can all react differently to the numerous political and economic events that unfold and develop with increasing regularity.

Why Precious Metals?

Despite the complexity and diversity of elements that can interact, many investment professionals recommend including precious metals as part of a properly diversified portfolio in an attempt to provide potential capital appreciation, liquidity, and as a hedge against conventional assets. The Precious Metals Select Portfolio is a professionally-selected unit investment trust that invests in common stocks of metals and mining companies and exchange-traded funds (ETFs) which are designed to track gold, silver and other precious metals. For many investors, exposure to precious metals may offer one way to reduce the overall risk in a properly diversified portfolio.

Diversification has long been recognized as a helpful way to mitigate volatility. Effective diversification requires combining assets with low correlations—that is, those that have performed differently over varying market conditions. We believe precious metals can be used as an effective means to aid portfolio diversification because of their historically low correlation to investment-grade corporate bonds and equities.1 Because precious metals are not highly correlated with traditional asset classes, they can potentially decrease portfolio volatility, enhance overall return and provide meaningful diversification to an asset allocation strategy. It is important to note that diversification does not guarantee a profit or protect against loss.

1 Correlation measures the similarity of performance of two assets. Correlation is measured on a scale ranging between -1 and +1. +1 means that the two investments have moved in perfect tandem with each other. Alternatively, -1 means that when one security moves in one direction, the other security will move in the opposite direction.

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A Potential Inflation Hedge

Federal deficit concerns, questions regarding global economic growth, and trade tension between the U.S. and China, have contributed to an increase in the demand for precious metals assets. Additionally, the Federal Reserve has signaled it will implement more interest rate cuts in an attempt to offset growth concerns. This may encourage investors to continue to shift assets into commodities such as gold and other precious metals, which are historically known for holding value during times of rising inflation. Investing in precious metals themselves is not the only way to hedge against rising inflation. Mining companies also tend to benefit as their earnings could potentially improve if the price of gold and other precious metals rises. Such hedging may also be accomplished by investment in ETFs which themselves invest in commodities such as gold and silver.

Portfolio Objective

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 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 involved with an investment in a portfolio of common stocks and ETFs.

Common stocks are subject to certain 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.

ETFs 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 ETFs or their underlying investments change. Unlike open-end funds, which trade at prices based on a current determination of the fund’s net asset value, ETFs frequently trade at a discount from their net asset value in the secondary market.

You should be aware that an investment that is concentrated in stocks of precious metals companies in the materials sector involves additional risks, including limited diversification. Companies in the precious metals industry are subject to risks associated with the exploration, development, and production of precious metals including competition for land, difficulties in obtaining required governmental approval to mine land, inability to raise adequate capital, increases in production costs and political unrest in nations where sources of precious metals are located. In addition, the price of gold and other precious metals is subject to wide fluctuations and may be influenced by limited markets, fabricator demand, expected inflation, return on assets, central bank demand and availability of substitutes.

Companies involved in metals and mining can be significantly affected by events relating to international political and economic developments, energy conservation, the success of exploration projects, commodity prices, and tax and other government regulations. Investments in these companies may be speculative and may be subject to greater price volatility than investments in other types of companies. Risks of investing in these companies may include: changes in international monetary policies or economic and political conditions that can affect the supply of precious metals and consequently the value of metals and mining company investments; the U.S. or foreign governments may pass laws or regulations limiting metals investments for strategic or other policy reasons; and increased environmental or labor costs may depress the value of metals and mining investments.

Commodity prices are subject to several factors including, price and supply fluctuations, excess capacity, economic recession, domestic and international politics, government regulations, volatile interest rates, consumer spending trends and overall capital spending levels.

An investment in a portfolio which includes foreign securities should be made with an understanding of the additional risks involved, such as currency fluctuations, political risk, 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.

Because the portfolio is concentrated in companies headquartered, or with a significant presence, in Canada, the portfolio may present more risks than a portfolio which is broadly diversified over several regions.

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.

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.

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.

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.

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 the prospectus.

 
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.
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