Diversified Fixed Income ETF Portfolio, Series 44
The Diversified Fixed Income ETF Portfolio is a unit investment trust which seeks to provide investors
with current monthly income and diversification across fixed income asset classes. To accomplish this,
the portfolio invests in a broad range of exchange-traded funds (ETFs) which are further diversified
among U.S. and foreign fixed income securities of various maturities and credit quality.
Instead of using multiple investments, investors may be able to fulfill the fixed income allocation within
their investment plans with this single, diversified portfolio.
What is Asset Allocation?
Asset allocation is the process of developing a diversified investment portfolio by combining different
assets in varying proportions. A portfolio’s long-term performance is determined primarily by the
distribution of dollars among asset classes. The asset allocation decision is one of the most important
decisions you will make as an investor. Studies have found that an asset allocation policy is the number
one factor in determining both the return and the risk of an investment portfolio.*
What is an ETF?
ETFs offer investors the opportunity to buy and sell an entire basket of securities with a single
transaction throughout the trading day. ETFs combine the characteristics of a mutual fund with the
convenience and trading flexibility of stocks. Below is a list of other ETF features.
- DIVERSIFICATION | ETFs hold a basket of securities which helps to mitigate single security
risk. It is important to note that diversification does not guarantee a profit or protect against loss.
- TRANSPARENCY | ETF holdings are available daily so investors know what they own.
- TAX EFFICIENCY | The ETF structure allows for increased tax efficiency.
- FULLY INVESTED | Unlike a traditional mutual fund, ETFs do not need to hold cash in order to
satisfy investor redemptions which allows them to better adhere to their investment objective.
This unit investment trust seeks a high rate of current monthly income by investing in
a diversified portfolio of fixed income ETFs; 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 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 owning ETFs and fixed income securities.
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 ETFs 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, ETFs frequently trade
at a discount from their net asset value in the secondary market.
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.
Certain of the 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 which
utilize such securities. 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 securities and are affected by short-term credit developments to a greater degree.
All of the ETFs invest in investment grade securities. Investment grade securities are subject to numerous risks including higher interest rates, economic recession, deterioration of the investment grade security market or
investors’ perception thereof, possible downgrades and defaults of interest and/or principal.
Certain of the
ETFs included in the portfolio invest in mortgage-backed securities.
Rising interest rates tend to extend the duration of mortgage-backed
securities, making them more sensitive to changes in interest rates,
and may reduce the market value of the securities. In addition,
mortgage-backed securities are subject to prepayment risk, the risk
that borrowers may pay off their mortgages sooner than expected,
particularly when interest rates decline.
Certain of the 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 ETFs invest in covenant-lite loans which contain fewer or no maintenance covenants and may
hinder the ETF’s ability to reprice credit risk and mitigate potential loss especially during a downturn in the
Certain of the ETFs
invest in U.S. Treasury obligations which are subject to
numerous risks including higher interest rates, economic
recession and deterioration of the bond market or investors’
Certain of the ETFs invest in securities issued by foreign issuers
which are subject to certain risks including currency and interest
rate fluctuations, political risks, withholding, the lack of
adequate financial information, and exchange control
restrictions impacting foreign issuers.
On January 31, 2020, the United Kingdom officially departed the
European Union (commonly referred to as “Brexit”). Brexit has led to
volatility in global financial markets, in particular those of the United
Kingdom and across Europe, and may also lead to weakening in
political, regulatory, consumer, corporate and financial confidence in
the United Kingdom and Europe.
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.
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 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.
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.
For a discussion of additional risks of investing in the trust see
the “Risk Factors” section of the prospectus.