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       


Target Triad Portfolio, 4th Quarter 2022 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 Triad Portfolio is a unit investment trust which provides you with the convenience of owning three distinct strategies in one investment. 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 1996, 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 Triad Portfolio.

Keys to Strategy Investing

Diversify – We expect some strategies to perform better than others under different market conditions. That’s why we believe it is important to diversify among different strategies. Target Triad consists of three distinct strategies – each using factors or screens to select stocks designed specifically for their unique characteristics. The result is a portfolio that is diversified across sectors, growth and value styles and countries. Diversification does not guarantee a profit or protect against loss.

Have Discipline – 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.

Rebalance Annually – Studies have shown that rebalancing can provide benefits to your long-term investment plan. Rebalancing is simple with Target Triad. When the portfolio terminates, investors have the option to reinvest their proceeds, at a reduced sales charge, into a new, rebalanced portfolio. In addition to rebalancing the individual component strategies back to their original weighting, new stocks are also selected by reapplying the underlying strategies. It is important to note that rebalancing may cause a taxable event unless units of the portfolio are purchased in an IRA or other qualified plan.


Portfolio Selection Process

The Target Triad Portfolio seeks above-average total return by adhering to a simple investment strategy; however, there is no assurance the objective will be met. The portfolio is comprised of the three strategies described below.

Target Growth Strategy – 60%

  • Begin with all stocks traded on a U.S. exchange and screen for the following:

    • Minimum market capitalization of $6 billion.

    • Minimum three month average daily trading volume of $5 million.

    • Minimum stock price of $5.

  • Eliminate REITs, ADRs, regulated investment companies and limited partnerships.

  • Select only those stocks with positive one year sales growth.

  • Rank the remaining stocks on three factors:

    • Sustainable growth rate.

    • Change in return on assets.

    • Recent 6-month price appreciation.

  • Purchase an approximately equally weighted portfolio of the 30 stocks with the highest combined ranking on the three factors, subject to a maximum of six stocks from any one of the major GICS market sectors. The financials and real estate sectors are combined for the sector limit purpose.

Target Diversified Dividend Strategy – 30%

  • Begin with all stocks traded on a U.S. exchange and screen for the following:

    • Minimum market capitalization of $250 million.

    • Minimum three month average daily trading volume of $1.5 million.

    • Minimum stock price of $5.

  • Eliminate REITs, ADRs, regulated investment companies and limited partnerships.

  • Select only those stocks with positive three year dividend growth.

  • Give the remaining stocks a weighted ranking on three factors:

    • Indicated dividend yield – 50%.

    • Price to book – 25%.

    • Payout ratio – 25%.

  • Purchase an approximately equally weighted portfolio consisting of four stocks from each of the major GICS market sectors with the highest combined ranking on the three factors. The financials and real estate sectors are combined for the sector limit purpose.

NYSE® International Target 25 Strategy – 10%

  • Begin with the stocks that comprise the NYSE International 100 IndexSM. The index consists of the 100 largest non-U.S. stocks trading on the New York Stock Exchange.

  • Rank each stock on two factors:

    • Price to book.

    • Price to cash flow.

  • Screen for liquidity by eliminating companies with average daily trading volume below $300,000 for the prior three months.

  • Purchase an approximately equally weighted portfolio of the 25 eligible stocks with the best overall ranking on the two factors.

Not FDIC Insured • Not Bank Guaranteed • May Lose Value

Mountain Chart

Standard Deviations* Average Annual Total Returns*
S&P 500
Strategy S&P 500
Since 1996 15.16% 16.96% 10.23% 10.44%
25 years 15.31% 17.14% 9.75% 9.99%
20 years 14.63% 16.76% 9.51% 7.29%
15 years 15.32% 17.92% 10.65% 5.22%
10 years 13.07% 14.90% 16.53% 10.33%
5 years 15.38% 17.58% 18.45% 11.35%
3 years 17.40% 19.74% 26.05% 17.86%
*Through 12/31/21

Annual Total Returns
Year S&P 500


1996 22.89% 22.06%
1997 33.31% 34.65%
1998 28.55% 27.38%
1999 21.03% 31.77%
2000 -9.10% 11.82%
2001 -11.88% 4.80%
2002 -22.09% -11.68%
2003 28.65% 38.16%
2004 10.87% 18.42%
2005 4.90% 12.18%
2006 15.76% 17.46%
2007 5.56% 13.27%
2008 -36.99% -47.59%
2009 26.46% 27.07%
2010 15.08% 16.26%
2011 2.08% -8.44%
2012 15.98% 7.41%
2013 32.36% 33.10%
2014 13.66% 4.42%
2015 1.38% -0.12%
2016 11.93% 4.71%
2017 21.80% 24.47%
2018 -4.39% -16.01%
2019 31.45% 28.79%
2020 18.39% 10.19%
2021 28.67% 15.37%
11/30/22 -13.12% -8.92%

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. Strategy returns assume that dividends are reinvested semi-annually while index returns assume dividends 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.

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.

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 available information.

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

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.

NYSE and NYSE® International 100 Index (“Index”) are service/trademarks of ICE Data Indices, LLC or its affiliates (“IDI”) and have been licensed for use by First Trust in connection with the Target Triad Portfolio. The portfolio is not sponsored, endorsed, sold or promoted by IDI and IDI makes no representations or warranties regarding the advisability of investing in the portfolio. IDI and its third party suppliers accept no liability in connection with use of the Index or the portfolio. See the prospectus for a full copy of the disclaimer.


CUSIP identifiers have been provided by CUSIP Global Services, managed on behalf of the American Bankers Association by FactSet Research Systems Inc. and are not for use or dissemination in a manner that would serve as a substitute for any CUSIP service. The CUSIP Database, ©2022 CUSIP Global Services. "CUSIP" is a registered trademark of the American Bankers Association.

Fund Cusip Information
30328H500 (Cash)
30328H518 (Reinvest)
30328H526 (Cash-Fee)
30328H534 (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, 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)
Home |  Important Legal Information |  Privacy Policy |  California Privacy Policy |  Business Continuity Plan |  FINRA BrokerCheck
Copyright © 2022 All rights reserved.