Low Volatility Portfolio, Series 38

The ebb and flow of markets can have a significant impact on a portfolio. For investors focused on long-term investment objectives, one way to potentially mitigate the adverse effects of market movements is to invest in relatively low-volatility stocks. Typically, these stocks do not have as dramatic price fluctuations (relative to other stocks), but change in value steadily over time.

The goal of the Low Volatility Portfolio is to provide investors with exposure to 50 well-capitalized companies which have displayed low price fluctuations over time while also retaining capital growth potential.

Portfolio Selection Process

Through our multi-factor selection process we seek to find the stocks that we believe have the best prospects for above-average capital appreciation.

Step 1: Fundamental Model Ranking

All stocks contained in the S&P 500 Index are ranked by the following equally weighted factors to determine an overall fundamental model rank:

• Price-to-book.


• Price-to-cash flow.


• Return on assets.

Step 2: Volatility Model Ranking

All stocks contained in the S&P 500 Index are ranked by long- and short-term volatility based on standard deviation of historical returns in order to determine each stock’s volatility model rank.

Step 3: Select Lowest Volatility Stocks

The top 100 stocks in the S&P 500 Index according to their volatility model rank are determined.

Step 4: Select Highest Fundamentally Ranked Stocks

The remaining stocks are ranked based on their fundamental model score and the top 50 stocks are selected for the portfolio subject to a maximum of 25% in any one sector. Stocks are equally weighted within the portfolio.

Portfolio Objective

This unit investment trust seeks above-average capital appreciation; however, there is no assurance the objective will be met.

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.

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

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 mid-cap companies is subject to additional risks, as the share prices of 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.

Ongoing armed conflicts between Russia and Ukraine in Europe and among Israel, Hamas and other militant groups in the Middle East, have caused and could continue to cause significant market disruptions and volatility within the markets in Russia, Europe, the Middle East 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 ongoing effects of the COVID-19 global pandemic, or the potential impacts of any future public health crisis, may cause significant volatility and uncertainty in global financial markets. While vaccines have been developed, there is no guarantee that vaccines will be effective against future 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.

This UIT is a buy and hold strategy and investors should consider their ability to hold the trust until maturity. There may be tax consequences unless units are purchased in an IRA or other qualified plan.