S&P Target SMid 60 Portfolio, 4th Quarter 2022 Series
S&P Target SMid 60 4Q ‘22 - Term 1/9/24 (S&P Target SMid 60 Portfolio) is a unit investment trust which invests in a fixed portfolio of stocks for approximately 15 months. The stocks are selected by
applying a disciplined investment strategy which adheres to pre-determined screens and factors. The strategy seeks to identify small and mid-capitalization stocks with improving fundamental
performance and market sentiment.
The strategy focuses on small and mid-size companies because
we believe they are more likely to be in an earlier stage of their economic
life cycle than mature large-cap companies. In addition, the ability to take
advantage of share price discrepancies is likely to be greater with smaller
stocks than with more widely followed large-cap stocks, in our opinion. The portfolio seeks
above-average total return; however, there is no assurance the objective will
Portfolio Selection Process
The strategy is based on these important steps:
- Begin with the stocks that comprise the S&P MidCap 400 and the S&P SmallCap
- Rank the stocks in each index by price-to-book value. Select the best quartile
from each index - 100 stocks from the S&P MidCap 400 Index and 150 stocks
from the S&P SmallCap 600 Index with the lowest, but positive, price-to-book
- Rank each stock on three factors:
- Price to cash flow
- 12-month change in return on assets
- 3-month price appreciation
- Eliminate any regulated investment companies, limited partnerships, business development
companies, and stocks with a market capitalization of less than $250 million and with an
average daily trading volume of less than $250,000.
- The 30 stocks from each index with the highest combined ranking on the three factors are selected for the portfolio.
- The stocks selected from the S&P MidCap 400 Index are given approximately
twice the weight of the stocks selected from the S&P SmallCap 600 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 S&P Target SMid 60 Portfolio. 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.
Not FDIC Insured Not Bank Guaranteed May Lose Value
||Average Annual Total Returns*
|Annual Total Returns
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 1000 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. Strategy returns assume that all dividends are reinvested semi-annually while index returns assume dividends are reinvested when they are received. 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 1000 Index in certain years and may produce negative results.
The S&P 1000 Index is an unmanaged index of 1000 stocks used to measure small
and mid-cap U.S. stock market performance by combining the S&P MidCap 400 and
S&P SmallCap 600 indices. An 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.
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 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 consumer discretionary and the financials sectors which involves additional risks, including limited diversification. The companies engaged in the
consumer discretionary sector 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. 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.
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.
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.
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
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 and may continue to cause significant volatility and declines in global financial markets. While the U.S. has resumed “reasonably” normal business activity, 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.
The S&P MidCap 400 and the S&P SmallCap 600 Indices are
products 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
S&P Target SMid 60 Portfolio 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 S&P
MidCap 400 and the S&P SmallCap 600 Indices.