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So you invested in a few corporate bonds and G-Secs a few years ago, hoping to create a steady source of income for yourself. But since your investment, you haven’t actually revisited your portfolio. As a result, you don’t actually know how they’ve been performing.
This is precisely why you need to know how to track a bond portfolio in India. Only when you know how to review your bond investments can you determine whether they are performing to your expectations or falling short.
In this guide, we’ll explore how to structure a bond portfolio review. We’ll also look at the various tools and metrics you can use to keep yourself updated on the performance of your investments.
What is a Bond Portfolio Review?
A bond portfolio review is a structured process in which you evaluate your bond investments to check if they’re still aligned with your financial goals, risk appetite, and investment horizon. The process involves thoroughly assessing key metrics periodically to get a clear picture of how your portfolio is performing.
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Metrics to Be Monitored During a Bond Portfolio Review
To monitor bond investment performance, you must analyse five key metrics. Here’s a quick overview of what they are.
Yield to Maturity (YTM)
Yield to Maturity (YTM) is a metric that measures the overall return you will earn from a bond if you stay invested until maturity. It takes into account the bond’s current price, interest payments, and the time remaining until maturity. By tracking the YTM, you can understand whether the bond is still delivering the return you originally expected or if you need to sell.
Current Yield
The current yield is a much simpler metric to keep track of. It tells you how much income your bond is generating relative to its current market price. To calculate the current yield, you must divide the annual interest payment by the bond’s current price. The higher the current yield, the better your bond is performing.
Duration
One of the key metrics you must track during a bond portfolio review is the duration. It shows how sensitive your bond’s price is to changes in interest rates in the market. The higher the duration of a bond, the more its value will fluctuate when interest rates move. Duration helps you understand the interest rate risk you’re carrying.
Credit Rating
A credit rating agency like CRISIL, ICRA, or CARE assigns a rating to every corporate bond. This rating indicates the bond issuer’s ability to meet the interest payment obligations. The higher the credit rating, the lower the overall risk of default.
That said, credit ratings can change over time. The rating agencies may sometimes downgrade a bond’s ratings, which can affect both value and risk profile. Therefore, it is essential to regularly check the credit ratings during a bond portfolio review. This way, you can avoid getting caught off guard.
XIRR
Bond portfolio XIRR is the single most accurate measure of overall performance. XIRR stands for Extended Internal Rate of Return and is a metric that calculates the annualised return on investments.
Unlike other simple calculations, XIRR accounts for the timing and size of every cash inflow and outflow. It includes interest payments, reinvestments, and principal repayments. If your bond portfolio XIRR is consistently lower than expected, it’s often a clear signal for careful attention.
Tools to Monitor Bond Portfolios
If you wish to make the review process smooth and easy, you must use the right bond portfolio tools in India. Let’s look at some of the most useful tools available to retail investors for tracking and monitoring bond investments.
Spreadsheet Utility
A well-structured spreadsheet is one of the most powerful bond portfolio tools in India. One of the key advantages of using a spreadsheet is that it is highly customisable and flexible. You can record your bond purchases, track coupon payments and upcoming maturities, monitor yields, and calculate your bond portfolio XIRR using built-in functions. Additionally, you can also convert metrics into more readable graphs or pie charts that provide all the necessary information at a glance.
Demat Account Statement
If you hold bonds electronically, your demat account statement could be the best tool for reviewing performance. This is often a good starting point for beginners who lack the knowledge or skills required to use a spreadsheet utility. A quick demat bond holdings check can tell you what bonds you currently hold, their face value, the number of units you own, and their current market value.
CDSL and NSDL Portals
If you own multiple demat accounts, a demat bond holdings check across all of them can be time-consuming. In such cases, logging directly into depository portals like CSDL’s Easi or NSDL’s Speed-e can be useful. These platforms provide a single, depository-level view of the bonds you hold in all your demat accounts.
Annual Information Statement (AIS)
The Annual Information Statement (AIS) is a facility that’s available on the Income Tax portal. It provides a consolidated view of the interest payments you received from bonds, capital gains from the sale of bonds through the stock exchange, and TDS deductions for a financial year. With the AIS, you can verify if all the interest payments have been accurately recorded.
Bond Portfolio Dashboard
If you’ve invested in corporate bonds or government securities through an online bond platform provider (OBPP), you can get a comprehensive real-time view of all of your holdings in the bond portfolio dashboard section. You can track coupon payment schedules, monitor and compare yields, and get a clear picture of your portfolio performance. Portfolio dashboard eliminates the need to switch between multiple platforms or maintain manual records.
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Ideal Frequency of Bond Portfolio Reviews
Before we explore how to track a bond portfolio in India, it’s essential to explore the frequency at which you need to review your investments.
As a general rule, it’s advisable to perform a bond portfolio review every month if you hold corporate bonds or NCDs. These financial instruments are more prone to credit rating revisions. And so, monitoring their performance more frequently can keep you informed of rating downgrades and allow you to take corrective action quickly.
Meanwhile, a quarterly review would be sufficient if you’ve only invested in government securities (G-Secs).
However, if there’s a change in the interest rates, a quick check across all bonds in your portfolio is advisable to make sure that your investments are not suffering as a result.
How to Track a Bond Portfolio in India: A Step-By-Step Guide
A bond portfolio review need not be a complicated or time-consuming process. By following the steps outlined below, you can perform a thorough bond portfolio review within just a few hours.
- Step 1: Consolidate Your Bond Holdings
The first step is to combine all your bond investments in one pla1ce. A spreadsheet utility is one of the best bond portfolio tools in India for this, as it allows you to enter bond-related information and create reports easily.
- Step 2: Verify Interest Payments
Cross-check all interest payments you’ve received against the expected payment schedule for the bonds. If any payments are missing or delayed, follow up with your broker or OBPP immediately.
- Step 3: Check Credit Ratings
Check the current credit ratings of all corporate bonds and NCDs in your portfolio. If any issuer’s credit rating has been downgraded since your last bond portfolio review, you must assess whether you’re comfortable continuing to hold it.
- Step 4: Calculate your XIRR
Update your spreadsheet utility with all the cash inflow and outflow information for every bond investment you made. Then, use the XIRR function to get an up-to-date picture of your portfolio’s annualised return. You can compare this XIRR with your expected return to see if your bond investments are performing well or not.
- Step 5: Review Upcoming Maturities
Check which bonds in your portfolio are maturing in the next few months. This way, you’ll have enough time to plan your reinvestment strategy and avoid leaving a large amount of capital idle.
- Step 6: Rebalance If Necessary
If you find any misalignment in terms of credit quality, investment horizon, or yield, you may consider rebalancing your portfolio by selling off underperforming bonds and reinvesting them in good-quality investments.
Stay on Top of Your Bond Portfolio with GoldenPi
Building a fixed-income portfolio is not enough. You must supplement it with a proper bond portfolio review protocol to make sure that they align with your requirements.
With GoldenPi, you can invest in fixed deposits from RBI-licenced banks, NCD IPOs, and corporate bonds across credit ratings. In addition to investing, you also get access to a comprehensive bond portfolio dashboard that gives you deep, real-time insights into your investments. The dashboard presents all of the information you need in a transparent, clear, and convenient manner to keep you informed.
FAQs on How to Track Bond Portfolio in India
Regular tracking and review of bond portfolios can keep you informed of upcoming interest payments and bond maturities. It can also bring changes in the issuer’s credit rating or other material developments to your notice.
You should do a thorough bond portfolio review every quarter. If you hold multiple corporate bonds across credit ratings, it is advisable to do a quick check every month.
When you monitor bond investment performance, you must focus on metrics like yield to maturity, current yield, credit ratings, and accrued interest. These metrics give you a clearer picture of how your portfolio is performing and if it still aligns with your goals.
You can calculate your bond portfolio XIRR by recording all cash outflows (investments) and cash inflows (interest payments and principal repayments), along with their dates, in a spreadsheet. Then, you can simply use the XIRR function of your spreadsheet tool to get an annualised return figure.
You can consider rebalancing your portfolio if there are major developments that significantly impact the returns. These include a major change in interest rates and a downgrade of an issuer’s credit rating. You could also rebalance your portfolio if its tenure doesn’t match your investment horizon.
Disclaimer:
This information is for general information purposes only. GoldenPi makes no guarantee on the accuracy of the data provided here; the information displayed is subject to change and is provided on an as-is basis. Nothing contained herein is intended to or shall be deemed to be investment advice, implied or otherwise. Investments in the securities market are subject to market risks. Read all the offer-related documents carefully before investing.
Fixed Deposit schemes are regulated by the Reserve Bank of India. GoldenPi Securities Private Limited is a registered debt broker and acts as a distributor and not as a manufacturer of the product.
