Designed for down markets
A Phoenix note pays you monthly income as long as the market doesn't drop past a set level. If it does, your income pauses until the market recovers. Your principal is protected unless the market is still down past that level at the end of the term. This is an income tool, not a growth tool — you're trading upside for steady monthly cash flow with a meaningful cushion underneath.
To show you how a Phoenix note works, we'll use terms similar to a note we built recently. Market conditions drive pricing, so these numbers will shift — but the mechanics stay the same.
How It Works
Using the terms above, this note pays 10% annually, distributed monthly — roughly 0.83% per month on your invested capital. The note is linked to one or more market indices, and as long as none of them have fallen more than 30% from where they started, you get paid every month.
The note also has observation dates — typically quarterly — where the bank checks whether all of the underlying indices are positive. If they are, the note gets called. That means it ends early, you get your full principal back, and you've collected whatever income you earned up to that point. Then we look for the next note.
If the market is down but hasn't breached the 30% barrier, nothing changes. You keep collecting income. The note continues.
What's the Trade-Off
"You're giving up market upside. If the S&P runs up 25% in a year, you still got your 10%."
What you give up
• Full market upside in strong rallies
• Liquidity — capital is committed for the term
• Unlimited growth potential
What you get
• Defined monthly income (10% annualized)
• 30% downside cushion before principal is at risk
• Income even in flat or moderately down markets
What Can Go Wrong
The market drops more than 30% and stays there.
If any of the underlying indices falls below the barrier during the term, your income pauses. You don't lose anything at that point — you just stop getting paid. If the market recovers above the barrier, your income resumes.
The note gets called early.
If all indices are positive on an observation date, the note ends. That's generally good news — you got your income and your principal back. But it also means you need to reinvest, and the terms on the next note may be different depending on market conditions.
You miss a big rally.
If the market surges 30% in a year, you earned 10%. That's the cost of having defined terms. You knew that going in, but it can still be frustrating to watch.
What Happens When the Note Ends
Called early
All indices are positive on an observation date. You get your full principal back plus all income earned. We reinvest into a new note.
Maturity — barrier intact
The term runs its full length and no index is below the barrier. You get your full principal back plus all income earned.
Maturity — barrier breached
An index is still down more than 30% at maturity. Your principal is reduced based on the worst-performing index. Income you already received is yours to keep.
When This Makes Sense
You want an income stream higher than bonds, without taking full market risk.
You're comfortable with a 5-year commitment on a portion of your portfolio.
You understand the market needs to fall more than 30% — and stay there at maturity — before your principal is at risk.
You're prioritizing income and downside cushion over capturing full upside.
