Tactical Income Portfolio, Series 78
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 and ETFs 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.
Certain of the funds invest in limited duration bonds. Limited duration bonds are subject to interest rate risk, which is the risk that the value of a security will fall if interest rates increase. While limited duration bonds are
generally subject to less interest rate sensitivity than longer duration bonds, there can be no assurance that interest rates will not rise during the life of the trust.
All of the funds 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 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 funds 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 common stocks are issued by, and certain of the funds invest in 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 funds invest in senior loans. The yield on 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 funds invest in covenant-lite loans which contain fewer or no maintenance covenants and may hinder the 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.
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
The ongoing effects of the COVID-19 global pandemic, or the potential impacts of any future public health crisis, may cause significant volatility and uncertainty in global financial markets. While vaccines have been developed, there is no guarantee that vaccines will be effective against future 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 the prospectus.