Tactical Income Portfolio, Series 73
Interest rates remain low from a historical perspective, but the current environment has made
it challenging to invest for income. 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.
The Tactical Income Portfolio is a unit investment trust that invests in a diversified portfolio
of closed-end funds (CEFs), exchange-traded funds (ETFs), 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 income and preferred stock funds.
- 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 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.
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, closed-end funds and
Closed-end funds and 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 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.
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.
All of the closed-end funds and 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. All of the floatingrate
securities pay interest based on LIBOR. The United Kingdom’s Financial Conduct Authority (“FCA”), which regulates LIBOR, intends to cease making LIBOR available as a reference rate over a phase-out period that began in
early 2022. However, subsequent announcements by the FCA, the LIBOR administrators, and other regulators indicate that it is possible that the most widely used LIBOR rates may continue until mid-2023. The unavailability
or replacement of LIBOR may affect the value, liquidity or return on certain portfolio investments. Any potential effects of the transition away from LIBOR can be difficult to ascertain, and they may vary depending on a variety
of factors and they could result in losses to the portfolio.
Certain of the closed-end funds and ETFs 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 and ETFs invest in preferred securities. Preferred securities are equity securities of the issuing company which pay income in the form of dividends. Preferred securities are typically subordinated
to bonds and other debt instruments in a company’s capital structure, and therefore will be subject to greater credit risk than those debt instruments.
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 closed-end funds and ETFs 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.
Certain of the closed-end funds and ETFs invest in covenant-lite loans which contain fewer or no maintenance covenants and may hinder the closed-end funds’ ability to reprice credit risk and mitigate potential loss especially
during a downturn in the credit cycle.
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. Risks associated with investing in non-U.S.
securities may be more pronounced in emerging and developing markets where the securities markets
are substantially smaller, less developed, less liquid, less regulated, and more volatile than the U.S. and
developed non-U.S. markets.
Approximately one year after the United Kingdom officially departed the European Union (commonly
referred to as “Brexit”), the United Kingdom and the European Union reached a trade agreement that became
effective on December 31, 2020. It is not currently possible to determine the extent of the impact the Brexit
trade agreement may have on the portfolio’s investments and this certainly could negatively impact current
and future economic conditions in the United Kingdom and other countries, which could negatively impact
the value of the portfolio’s investments.
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 has caused significant volatility and declines in global financial markets,
causing losses for investors. The development of vaccines has slowed the spread of the virus and allowed
for the resumption of “reasonably” normal business activity in the United States, although many countries
continue to impose lockdown measures. Additionally, there is no guarantee that vaccines will be effective
against emerging variants of the disease.
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.
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.
For a discussion of additional risks of investing in the trust see the “Risk Factors” section of