Home   Logon   Mobile Site   Research and Commentary   About Us   Call 1.800.621.1675 or Email Us       Follow Us: 

Search by Ticker, Keyword or CUSIP       


Nasdaq® Factor Dogs Opportunity Portfolio, Series 2

Factor-Based Investing

Selecting stocks based on fundamental factors has long been a hallmark of portfolio management. Advocates of factor-based strategies favor their ability to offer exposure to a concentrated portfolio of securities which target a desired deviation from the risk-return profile of generic market tracking strategies. Critics of factor-based strategies point out that this deviation from traditional market tracking strategies leaves investors exposed to heightened volatility resulting from factors moving in and out of favor over time.

While it is true that no factor-based strategy perpetually outperforms, many investors attempt to find the right combination of factor exposures to generate consistent market outperformance. However, the perfect combination or timing in factor-based approaches remains elusive.

Mean Reversion: Nasdaq's Factor Allocation Solution

There has been plenty of research showing that periods of factor-specific outperformance relative to the broader market have historically been followed by periods of underperformance, and vice-versa. With this in mind, Nasdaq® has developed a strategy which selects securities with the characteristics of the investment factor, dubbed the “dog” factor, which has underperformed the other factors in the past year. The strategy invests in the companies from one of its family of factor-specific indexes: momentum, high yield, growth, value, low volatility, and quality. By selecting and weighting towards the factor that has been most out of favor, the strategy seeks to capture the future upward mean reversion attributable to the “dog” factor. The example below shows how the worst performer of Nasdaq’s six factor-specific indexes becomes the Nasdaq® Dogs selection at the start of the following year. The high yield value factor index was the worst performer during the 12 months preceding the time the trust’s portfolio was selected, therefore the trust will invest in the high yield stocks included in the value high yield factor index.

Given its mean reversion focus, the strategy is an inherently contrarian viewpoint. The strategy purposefully avoids that which is currently outperforming in favor of that which has underperformed. At first glance, many investors deem such logic counterintuitive. Yet, when comparing this contrarian approach to its conformist counterpart, the risks of long-term performance chasing are uncovered. The Nasdaq® Factor Dogs Opportunity Portfolio seeks to offer a transparent, rules-based approach to factor-based allocation that is both strategic and dynamic.

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 objective, 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 owning common stocks, 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.

You should be aware that the portfolio is concentrated in stocks in the consumer products sector which involves additional risks, including limited diversification. The companies engaged in the consumer products industry are subject to global competition, changing government regulations and trade policies, currency fluctuations, and the financial and political risks inherent in producing products for foreign markets.

Although this portfolio terminates in approximately 15 months, the strategy is long-term. Investors should consider their ability to pursue investing in successive portfolios, if available. There may be tax consequences unless units are purchased in an IRA or other qualified plan.

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.

Certain of the securities in the portfolio are issued by Real Estate Investment Trusts (REITs). Companies involved in the real estate industry are subject to changes in the real estate market, vacancy rates and competition, volatile interest rates and economic recession.

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.

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.

Fund Cusip Information
30307A666 (Cash)
30307A674 (Reinvest)
30307A682 (Cash-Fee)
30307A690 (Reinvest-Fee)
Printer Friendly Page Printer Friendly Page
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 and the Internal Revenue Code. First Trust has no knowledge of and has not been provided any information regarding any investor. Financial advisors must determine whether particular investments are appropriate for their clients. First Trust believes the financial advisor is a fiduciary, is capable of evaluating investment risks independently and is responsible for exercising independent judgment with respect to its retirement plan clients.
First Trust Portfolios L.P.  Member SIPC and FINRA.
First Trust Advisors L.P.
Home |  Important Legal Information |  Privacy Policy |  Business Continuity Plan |  FINRA BrokerCheck
Copyright © 2018 All rights reserved.