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Class I
Class II
First Trust/Dow Jones Dividend & Income Allocation Portfolio

  • Regardless of market conditions, dividends should be considered an important component of an investment strategy.
  • Steadily increasing dividends have the potential to amplify a stock's total return.
  • Companies that have the potential to regularly raise dividends provide investors an opportunity to keep up with the rising costs of living.
  • Steadily increasing dividends can provide a cushion to help offset a stock price's decline.
  • The tax-deferred compounding effect of reinvesting dividends year after year can enhance a portfolio's return.

  • Seeks to provide regular income distributions.
  • Seeks to preserve capital with investment-grade bonds.
  • May reduce portfolio risk.
  • The compounding effects of reinvested income year after year can enhance a portfolio's return.
According to data from Morningstar/Ibbotson Associates, dividends have provided approximately 41% of the 10.16% average annual total return of the S&P 500 index from 1926 through 2017.


The equity component of the portfolio is derived from a quantitative process that seeks to provide total return through investing generally in dividend-paying stocks included in the Dow Jones U.S. Total Stock Market IndexSM. This portion of the portfolio focuses on stable, dividend-paying companies with strong balance sheets.

Eligible Universe
Dow Jones U.S. Total Stock Market IndexSM constituents that pay a dividend, have a market cap greater than $1 billion and three-month average daily trading volume greater than $5 million.

Investment Process Overview
A proprietary multi-factor quantitative model is utilized:
Investment Process Overview

The investment-grade fixed-income component seeks to preserve capital and provide total return through a disciplined assessment of sector relative value and rigorous analysis of credit fundamentals.

Eligible Universe
The portfolio universe consists of: Dow Jones Equal Weight U.S. Issued Corporate Bond IndexSM; investment-grade bonds of issuers included in the Dow Jones Composite AverageSM; U.S. Treasury obligations; and securities issued or guaranteed by agencies of the U.S. Government. Bonds must have investment-grade ratings by a major rating agency. The Fund may, at certain times, also hold exchange-traded funds (ETFs) that invest in investment-grade corporate bonds and U.S. Government bonds in lieu of investing directly in bonds.

Investment Process Overview
  • Follows a top-down analysis of key secular and cyclical trends.
  • Bottom-up fundamental research of individual credits complements top-down process.
  • The investment process routinely monitors market conditions and portfolio risk for their effect on relative value.

This portfolio is rebalanced quarterly.

To illustrate the role of dividends on a portfolio over time, if an investor had invested $1,000 in large company stocks (as measured by the S&P 500 Index) at year-end 1925, the investment would have grown to $7,337,663 by year-end 2017 with an average annualized return of 10.16%. Capital appreciation alone would have only grown to $209,535 over the same period, an average annualized return of 5.98%. Past performance is no guarantee of future results.
Dividend Chart

You should consider the fund's investment objectives, risks, and charges and expenses carefully before investing. You can download a prospectus or contact First Trust Portfolios, L.P. at 1-800-621-1675 to request a prospectus, which contains this and other information about the fund. Read it carefully before you invest.

Principal Risk Considerations

You could lose money by investing in the Fund. An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other governmental agency. There can be no assurance that the Fund's investment objective will be achieved.

CALL RISK. If an issuer calls higher-yielding debt instruments held by the Fund, performance could be adversely impacted.

CREDIT RISK. Credit risk is the risk that an issuer of a security will be unable or unwilling to make dividend, interest and/or principal payments when due and the related risk that the value of a security may decline because of concerns about the issuer's ability to make such payments.

CYBER SECURITY RISK. As the use of Internet technology has become more prevalent in the course of business, the Fund has become more susceptible to potential operational risks through breaches in cyber security. A breach in cyber security refers to both intentional and unintentional events that may cause the Fund to lose proprietary information, suffer data corruption or lose operational capacity. Such events could cause the Fund to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures and/or financial loss. Cyber security breaches may involve unauthorized access to the Fund's digital information systems through "hacking" or malicious software coding, but may also result from outside attacks such as denial-of-service attacks through efforts to make network services unavailable to intended users. In addition, cyber security breaches of the Fund's third party service providers, such as its administrator, transfer agent, custodian, or sub-advisor, as applicable, or issuers in which the Fund invests, can also subject the Fund to many of the same risks associated with direct cyber security breaches. The Fund has established risk management systems designed to reduce the risks associated with cyber security. However, there is no guarantee that such efforts will succeed, especially because the Fund does not directly control the cyber security systems of issuers or third party service providers.

DIVIDEND RISK. There is no guarantee that the issuers of the Fund's equity securities will declare dividends in the future or that, if declared, they will either remain at current levels or increase over time.

EQUITY SECURITIES RISK. Because the Fund invests in equity securities, the value of the Fund's shares will fluctuate with changes in the value of these equity securities. Equity securities prices fluctuate for several reasons, including changes in investors' perceptions of the financial condition of an issuer or the general condition of the relevant stock market, such as market volatility, or when political or economic events affecting the issuers occur. In addition, common stock prices may be particularly sensitive to rising interest rates, as the cost of capital rises and borrowing costs increase. The equity markets have experienced recent volatility that may lead to sharp declines in the value of the equity securities and the Fund.

An ETF trades like common stock and represents a portfolio of securities. The risks of owning an ETF generally reflect the risks of owning the underlying securities, although lack of liquidity in an ETF could result in it being more volatile and ETFs have management fees and other operating expenses that increase their costs.

FINANCIAL COMPANIES RISK. Financial companies are especially subject to the adverse effects of economic recession, currency exchange rates, government regulation, decreases in the availability of capital, volatile interest rates, portfolio concentrations in geographic markets and in commercial and residential real estate loans, and competition from new entrants in their fields of business.

FIXED-INCOME SECURITIES RISK. An investment in the Fund involves risk associated with an investment in fixed income securities including the risk that certain of the securities in the Fund may not have the benefit of covenants that would prevent the issuer from engaging in capital restructurings or borrowing transactions in connection with corporate acquisitions, leveraged buyouts or restructurings. This limitation could reduce the ability of the issuer to meet its payment obligations and might result in increased credit risk. In addition, certain of the securities may be redeemed or prepaid by the issuer, resulting in lower interest payments received by the Fund and reduced distributions to shareholders.

INCOME RISK. Income from the Fund's fixed income investments could decline during periods of falling interest rates.

INTEREST RATE RISK. Interest rate risk is the risk that the value of the fixed-income securities in the Fund will decline because of rising market interest rates. Interest rate risk is generally lower for shorter term investments, which generally have shorter durations, and higher for longer term investments. Duration is a common measure of interest rate risk, which measures a debt security's expected life on a present value basis, taking into account the debt security's yield, interest payments and final maturity. Duration is a reasonably accurate measure of a debt security's price sensitivity to changes in interest rates. The longer the duration of a debt security, the greater the debt security's price sensitivity is to changes in interest rates.

INVESTMENT COMPANIES RISK. The Fund may invest in the shares of other investment companies, and therefore, the Fund's investment performance and risks may be related to the investment performance and risks of the underlying funds. In general, as a shareholder in other investment companies, the Fund bears its ratable share of the underlying fund's expenses, and would be subject to duplicative expenses to the extent the Fund invests in other investment companies.

MANAGEMENT RISK. The Fund is subject to management risk because it is an actively managed portfolio. In managing the Fund's investment portfolio, the Fund's Advisor will apply investment techniques and risk analyses that may not have the desired result. There can be no guarantee that the Fund will meet its investment objective.

MARKET RISK. Market risk is the risk that a particular security owned by the Fund or shares of the Fund in general may fall in value. Securities are subject to market fluctuations caused by such factors as economic, political, regulatory or market developments, changes in interest rates and perceived trends in securities prices. Shares of the Fund could decline in value or underperform other investments.

MORTGAGE SECURITIES RISK. The Fund invests in mortgage-related securities, including mortgage-backed securities, which may make the Fund more susceptible to adverse economic, political or regulatory events that affect the value of real estate. Changes in local, state and federal policies could negatively impact the mortgage-related securities market, which include various government initiated and sponsored homeowner assistance programs and eminent domain issues. Mortgage-related securities are subject to the risk that the rate of mortgage prepayments decreases, which extends the average life of a security and increases the interest rate exposure. Mortgage-related securities may also face liquidity issues when the Fund seeks to sell such securities, but is unable to find buyers at a bid-ask spread to make the transaction feasible. These securities are also subject to the risk that the underlying borrowers may default on their mortgages, resulting in a non-payment of principal and interest. Finally, the mortgage-related securities market may be negatively impacted by regulatory changes including those that are related to the mandate or existence of the government-sponsored enterprises, Fannie Mae, Freddie Mac and Ginnie Mae.

SMALLER COMPANIES RISK. The Fund invests in small- and/or mid-capitalization companies. Such companies may be more vulnerable to adverse general market or economic developments, and their securities may be less liquid and may experience greater price volatility than larger, more established companies as a result of several factors, including limited trading volumes, products or financial resources, management inexperience and less publicly available information. Accordingly, such companies are generally subject to greater market risk than larger, more established companies.

The Dow Jones US Total Stock Market Index, Dow Jones Equal Weight US Issued Corporate Bond Index and Dow Jones Composite Average (the "Indexes") are products of S&P Dow Jones Indices LLC ("SPDJI"), and have been licensed for use by First Trust Advisors. 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"); these trademarks have been licensed for use by SPDJI and sublicensed for certain purposes by First Trust Advisors. First Trust Advisors' "First Trust/Dow Jones Dividend & Income Allocation 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(s) nor do they have any liability for any errors, omissions, or interruptions of the Indexes.

Not FDIC Insured • Not Bank Guaranteed • May Lose Value
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.
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