Tactical Income Portfolio, Series 58
Investors who are looking for income while still retaining growth potential have limited alternatives when faced with the possibility of rising interest rates. Bonds tend to lose value in a rising
interest rate environment. Equities, on the other hand, have often historically provided positive returns after the Federal Reserve’s initial rate hike. Like stock returns, economic growth, and inflation,
interest rates are one of those variables that you can’t control. But, as an investor, you can control how your investment dollars are allocated.
This unit investment trust seeks current income, with total return as a secondary objective; however, there is no assurance that the objectives will be achieved.
Investing for Rising Interest Rates
The Tactical Income Portfolio is a unit investment trust that invests in a diversified portfolio of closed-end
funds (CEFs), common stocks and real estate investment trusts (REITs). The portfolio is weighted based
on the adjacent allocation.
- The multi-strategy segment of the portfolio
consists of CEFs which invest in types of
securities which typically react favorably to
rising interest rates.
- The interest paid on a senior loan resets every
30-90 days based on prevailing short-term
interest rates. Therefore, should short-term rates
move higher, investors in senior loans would
receive a higher income stream due to the
floating rate nature of the interest on the loans.
- Unlike securities with a fixed-rate coupon, a
senior loan’s floating rate feature provides a
natural hedge against rising interest rates.
- While senior loans are generally loans which
have been made to companies whose debt is
typically rated below investment grade, they are
senior in the asset structure of a company and
historical recovery rates in the event of a default
tend to be much higher relative to junior high-yield
- The dividend-paying stocks and REITs are
selected by applying a disciplined investment
strategy which adheres to pre-determined
screens and factors. These screens and factors
are designed to identify companies that, in our
opinion, have above-average dividend yields
and trade at attractive valuations.
|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.
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 closed-end funds.
Closed-end funds 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 the
funds 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, closed-end funds frequently
trade at a discount to their net asset value in the secondary market. All of the closed-end
funds employ the use of leverage, which increases the volatility of such funds.
Certain of the closed-end funds invest in senior loans. The yield on closed-end funds which
invest in senior loans will generally decline in a falling interest rate environment and increase in
a rising interest rate environment. Senior loans are generally below investment grade quality
(“junk” bonds). An investment in senior loans involves the risk that the borrowers may default
on their obligations to pay principal or interest when due.
All of the closed-end funds invest in high-yield securities or “junk” bonds. Investing in high-yield
securities should be viewed as speculative and you should review your ability to assume the risks
associated with investments that utilize such bonds. High-yield securities are subject to
numerous risks including higher interest rates, economic recession, deterioration of the junk
bond market, possible downgrades and defaults of interest and/or principal. High-yield security
prices tend to fluctuate more than higher rated bonds and are affected by short-term credit
developments to a greater degree.
Certain of the closed-end funds invest in convertible securities. Convertible securities are bonds,
preferred stocks and other securities that pay a fixed rate of interest (or dividends) and will repay
principal at a fixed date in the future. However, these securities may be converted into a specific
number of shares of common stocks at a specified time. As such, an investment in convertible
securities entails some of the risks associated with both common stocks and bonds.
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.
Certain of the securities are issued by REITs.
Companies involved in the real estate industry are subject to changes in the real estate market,
vacancy rates, competition, volatile interest rates and economic recession.
Certain of the ETFs invest in floating-rate securities. A floating-rate security is an instrument in
which the interest rate payable on the obligation fluctuates on a periodic basis based upon
changes in an interest rate benchmark. As a result, the yield on such a security will generally
decline in a falling interest rate environment, causing the trust to experience a reduction in the
income it receives from such securities. Certain of the floating-rate securities pay interest based
on LIBOR. Due to the uncertainty regarding the future utilization of LIBOR and the nature of any
replacement rate, the potential effect of a transition away from LIBOR on a fund or the financial
instruments in which the fund invests cannot yet be determined.
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
An investment in foreign securities should be made with an understanding of the additional
risks involved with foreign issuers, such as currency and interest rate fluctuations,
nationalization or other adverse political or economic developments, lack of liquidity of certain
foreign markets, 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 developed, less liquid, less regulated, and more volatile than the U.S. and
developed foreign markets.
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.
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
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.
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.
For a discussion of additional risks of investing in the trust see the “Risk Factors” section of