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Target Double Play Portfolio, 3rd Quarter 2020 Series

The Strategy

Finding the right mix of investments is a key factor to successful investing. Because different investments often react differently to economic and market changes, we believe diversifying among both growth and value stocks, as well as several different sectors offers investors a better opportunity for investment success regardless of which investment styles prevail in the market.

The Target Double Play Portfolio is a unit investment trust which consists of an approximately equal weighting between two strategies – The Dow® Target Dividend Strategy and the Value Line® Target 25 Strategy. It invests in a fixed portfolio of stocks which are selected by applying pre-determined screens and factors and holds the stocks for approximately 15 months. The portfolio offers several potential advantages:

  • Complete transparency from the stock selection process to portfolio holdings and individual stock weightings;
  • Automated buy decisions helping to eliminate unwanted emotions from the investment process;
  • No style drift from manager-driven trading;
  • Low cash positions so more of your money is put to work;
  • Diversification, discipline, and a periodic rebalancing opportunity helping to decrease volatility and potentially increase returns.

As you can see in the charts below, if this strategy had been applied since 1992, investors would have realized higher total returns than by investing in the S&P 500 Index. It is important to note that the past performance of the strategy is hypothetical and it is not indicative of the future performance of the Target Double Play Portfolio. Diversification does not guarantee a profit or protect against loss.

History has shown that bear and bull markets are a normal occurrence. Although past performance is no guarantee of future results, history has also shown that equity investors have been rewarded for their patience over the long-term. The chart below illustrates this point based on applying the hypothetical strategy over one year, three year, and five year periods. Of course, there is no guarantee that the performance of the strategy or the trust will be positive over any future time period.


Portfolio Selection Process

The Target Double Play Portfolio seeks above-average total return by adhering to a simple investment strategy; however, there is no assurance the objective will be met. On the initial date of deposit, the portfolio is approximately equally weighted between the two strategies described below.

The Dow® Target Dividend Strategy

  • Begin with the stocks that comprise the Dow Jones U.S. Select Dividend IndexSM. The index consists of 100 widely-traded, dividend-paying stocks derived from the Dow Jones U.S. Total Market IndexSM.
  • Rank each of the 100 stocks on two factors:
    • Change in return on assets over the last 12 months. An increase in return on assets is generally used as an indication of improving business fundamentals and would receive a higher ranking than a stock with a negative change in return on assets.
    • Price to book. A lower, but positive, price to book ratio is generally used as an indication of value.
  • Purchase an approximately equally weighted portfolio of the 20 stocks with the best overall ranking on the two factors.

Value Line® Target 25 Strategy

  • Begin with the 100 stocks that Value Line® currently gives a #1 ranking for TimelinessTM (stocks of financial companies and companies whose shares are not listed on a U.S. exchange are not eligible for inclusion in the Value Line® Target 25 Strategy). Value Line® ranks approximately 1,700 stocks, only 100 of which are given their #1 ranking for TimelinessTM. They base their rankings on a long-term trend of earnings, prices, recent earnings, price momentum, and earnings surprises.
  • Rank the stocks on four factors:
    • 12 month price appreciation
    • 6 month price appreciation
    • Return on assets
    • Price to cash flow
  • Purchase a market cap-weighted portfolio of the 25 eligible stocks with the best overall ranking on the factors, subject to a minimum weighting of approximately 1% and a maximum weighting of approximately 25%.

Mountain Chart

Standard Deviations* Average Annual Total Returns*
S&P 500
Strategy S&P 500
Since 1992 13.98% 17.13% 9.77% 12.23%
25 years 14.54% 17.55% 10.20% 12.25%
20 years 14.50% 16.11% 6.05% 5.44%
15 years 13.79% 15.57% 8.99% 3.04%
10 years 12.45% 13.60% 13.54% 6.90%
5 years 11.97% 11.12% 11.68% 2.52%
3 years 12.10% 11.94% 15.25% 2.50%
*Through 12/31/19

Annual Total Returns
Year S&P 500


1992 7.61% 13.52%
1993 10.04% 21.60%
1994 1.30% 1.86%
1995 37.50% 49.45%
1996 22.89% 35.29%
1997 33.31% 37.11%
1998 28.55% 47.21%
1999 21.03% 52.88%
2000 -9.10% 7.16%
2001 -11.88% 20.11%
2002 -22.09% -12.47%
2003 28.65% 35.64%
2004 10.87% 20.40%
2005 4.90% 11.02%
2006 15.76% 9.05%
2007 5.56% 12.35%
2008 -36.99% -45.55%
2009 26.46% 8.54%
2010 15.08% 22.21%
2011 2.08% -12.10%
2012 15.98% 9.54%
2013 32.36% 31.31%
2014 13.66% 11.33%
2015 1.38% -7.79%
2016 11.93% 14.08%
2017 21.80% 7.25%
2018 -4.39% -7.71%
2019 31.45% 8.79%
07/31/20 2.39% -11.59%

Past performance is no guarantee of future results and the actual current performance of the portfolio may be lower or higher than the hypothetical performance of the strategy. Hypothetical returns for the strategy in certain years were significantly higher than the returns of the S&P 500 Index. Hypothetical strategy returns were the result of certain market factors and events which may not be replicated in the future. You can obtain performance information which is current through the most recent month-end by calling First Trust Portfolios L.P. at 1-800-621-1675 option 2. Investment return and principal value of the portfolio will fluctuate causing units of the portfolio, when redeemed, to be worth more or less than their original cost.

Simulated strategy returns are hypothetical, meaning that they do not represent actual trading, and, thus, may not reflect material economic and market factors, such as liquidity constraints, that may have had an impact on actual decision making. The hypothetical performance is the retroactive application of the strategy designed with the full benefit of hindsight. Strategy returns reflect a sales charge of 1.85% and estimated annual operating expenses of 0.185%, plus organization costs, but not taxes or commissions paid by the portfolio to purchase securities. Returns assume that all dividends received during a year are reinvested monthly. Actual portfolio performance will vary from that of investing in the strategy stocks because it may not be invested equally in these stocks and may not be fully invested at all times. It is important to note that the strategy may underperform the S&P 500 Index in certain years and may produce negative results.

The S&P 500 Index is an unmanaged index of 500 stocks used to measure large-cap U.S. stock market performance. The index cannot be purchased directly by investors.

Standard Deviation is a measure of price variability (risk). A higher degree of variability indicates more volatility and therefore greater risk.

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.

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 both the financials and information technology sectors which involves additional risks, including limited diversification. The companies engaged in the financials sector are subject to the adverse effects of volatile interest rates, economic recession, decreases in the availability of capital, increased competition from new entrants in the field, and potential increased regulation. The companies engaged in the information technology sector are subject to fierce competition, high research and development costs, and their products and services may be subject to rapid obsolescence. Technology company stocks, especially those which are Internet-related, may experience extreme price and volume fluctuations that are often unrelated to their operating performance.

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.

Large capitalization companies may grow at a slower rate than the overall market.

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.

The recent outbreak of a respiratory disease designated as COVID-19 was first detected in China in December 2019. The global economic impact of the COVID-19 outbreak is impossible to predict but is expected to disrupt manufacturing, supply chains and sales in affected areas and negatively impact global economic growth prospects. The COVID-19 outbreak has also caused significant volatility and declines in global financial markets, which have caused losses for investors. The impact of the COVID-19 outbreak may be short term or may last for an extended period of time, and in either case could result in a substantial economic downturn or recession.

Although this unit investment trust 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.

The Dow Jones U.S. Select Dividend IndexSM is a product of S&P Dow Jones Indices LLC or its affiliates ("SPDJI") and have been licensed for use by First Trust Portfolios L.P. Standard & Poor's® and S&P® are registered trademarks of Standard & Poor's Financial Services LLC ("S&P"); Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC ("Dow Jones"); and these trademarks have been licensed for use by SPDJI and sublicensed for certain purposes by First Trust Portfolios L.P. The Target Double Play Portfolio, which contains the Dow® Target Dividend Strategy is not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, their respective affiliates, and none of such parties make any representation regarding the advisability of investing in such product nor do they have any liability for any errors, omissions, or interruptions of the Dow Jones U.S. Select Dividend IndexSM.

“Value Line,” “The Value Line Investment Survey,” and “Timeliness” are trademarks or registered trademarks of Value Line, Inc. (“Value Line”) and have been licensed for use for certain purposes by First Trust Portfolios L.P. The Target Double Play Portfolio is not sponsored, endorsed, recommended, sold or promoted by Value Line and Value Line makes no representation regarding the advisability of investing in products utilizing such strategy. First Trust Portfolios L.P. is not affiliated with any Value Line company.

Fund Cusip Information
30314P706 (Cash)
30314P714 (Reinvest)
30314P722 (Cash-Fee)
30314P730 (Reinvest-Fee)
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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 professionals 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. (Form CRS)   •  First Trust Advisors L.P. (Form CRS)
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