Certainly, this is the crux of the issue, portfolio performance would be reported correctly but not security performance.
Portfolio Performance
Security Performance
It is not a crux if you accept that PP is not designed to reflect the internal relationships of an asset. In relation to the portfolio, the market price is the only relevant indicator. Therefore, this indicator also reflects the correct price.
You are also not interested in what happens internally in funds - and if you are, you analyse this with financial software and not with portfolio management software.
Cheers, Laura
Hello everyone, Iâm an investor from Argentina. Here the fixed income market (sovereign and corporate bonds) holds greater relevance than the equity market. I would like to contribute to this thread in the requesting a functionality that I believe is essential.
In Argentina, it is quite common for fixed income bonds to offer, in addition to interest payments, the possibility of early capital repayment, which we call âearly amortizationâ. This mechanism works as follows:
| Date | Amortization (%) | Residual Value | Interest | Cash Flow | Market Value |
|---|---|---|---|---|---|
| 10/11/2024 | 0 | 100 | 2.99 | 2.99 | 103.75 |
| 04/11/2025 | 33 | 67 | 2.99 | 35.99 | 69.51 |
| 10/11/2025 | 33 | 34 | 2.00 | 35.00 | 35.28 |
| 04/11/2026 | 34 | 0 | 1.02 | 35.02 | 0.00 |
As you can see, the market value of the bond starts at 103.75 (above its nominal value). As capital is amortized and interest payments are made, the market value decreases proportionally, as there is less outstanding capital, and therefore, lower expected future returns. By the end of the period (04/11/2026), the market value will be 0 as all the capital will have been repaid.
Itâs important to highlight that amortization is not a capital gain, but rather a recovery of the original capital. This differentiates it from the interest payments, which are considered gains.
Currently, the lack of functionality to represent amortizations in Portfolio Performance causes the balances and returns of my portfolios that include such bonds to be inaccurate. Any performance metric is incorrect as amortizations are wrongly accounted for as gains.
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You can treat it as a (partial) sell; same as the repayment of the bond at the end.
With amortization, the total number of units of the bond or asset doesnât decrease. In contrast, a sell would reduce the number of units held, which isnât the case here. The bondholder still holds the same number of units, just with a reduced principal.
Bonds do not have units, they have a nominal value, and that does decrease.
Every bond is a title. If you have 100 bond titles of 1000 nominal that partly amortises 30% of their nominal value, how would you input a partial sell? How many titles and what price? Selling 30% of the titles would lead to having 70 titles of 1.000 nominal, when you actually have 100 titles of 700 nominal.
A feature to reduce cost basis / disinvest per title as proposed in the introduction of the OP would solve this problem.
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There are no âtitlesâ, there is only a nominal value. And indeed, it used to be 100000 and is then 70000, so all is fine.
(In fact, as a workaround to make percent price notation work, we often recommend using a ânumber of sharesâ of nominal value divided by 100, so in this example 1000 before and 700 after. But properly supporting nominal value is an altogether different topic.)
Could you walk me through the process of adjusting the nominal value using the current features in Portfolio Performance? For example, using the bond from the tables below and as the bond amortizes, how should I reflect this adjustment while keeping the number of titles (shares) unchanged?
This is the technical detail of the bond:
| Date | Amortization | Interest | Residual Value | Nominal Value | Cash Flow â Interest | Cash Flow â Amortization | Comments |
|---|---|---|---|---|---|---|---|
| 01/12/2021 | 0,00 % | 9,625 % | 100,00 % | 100 | Issue Date | ||
| 01/06/2022 | 2,00 % | 9,625 % | 98,00 % | 100 | 4,81 | 2,00 | First payment |
| 01/12/2022 | 3,50 % | 9,625 % | 95,00 % | 100 | 4,72 | 3,50 | |
| 01/06/2023 | 3,50 % | 9,625 % | 91,00 % | 100 | 4,55 | 3,50 | |
| 01/12/2023 | 7,00 % | 9,625 % | 84,00 % | 100 | 4,38 | 7,00 | |
| 01/06/2024 | 10,00 % | 9,625 % | 74,00 % | 100 | 4,04 | 10,00 | |
| 01/12/2024 | 10,00 % | 9,625 % | 64,00 % | 100 | 3,56 | 10,00 | |
| 01/06/2025 | 10,00 % | 9,625 % | 54,00 % | 100 | 3,08 | 10,00 | |
| 01/12/2025 | 10,00 % | 9,625 % | 44,00 % | 100 | 2,60 | 10,00 | |
| 01/06/2026 | 10,00 % | 9,625 % | 34,00 % | 100 | 2,12 | 10,00 | |
| 01/12/2026 | 10,00 % | 9,625 % | 24,00 % | 100 | 1,64 | 10,00 | |
| 01/06/2027 | 10,00 % | 9,625 % | 14,00 % | 100 | 1,16 | 10,00 | |
| 01/12/2027 | 14,00 % | 9,625 % | 0,00 % | 100 | 0,67 | 14,00 | Due Date |
Hereâs the movement of assets and cash flow:
| Date | Shares | Quote | Purchase Value | Market Value | Cash Flow â Interest | Cash Flow â Amortization | Cash Flow â Sell |
|---|---|---|---|---|---|---|---|
| 01/12/2021 | 500 | 1,000 | 500 | 500,00 | |||
| 01/06/2022 | 500 | 1,040 | 490 | 520,00 | 24,05 | 10,00 | |
| 01/12/2022 | 500 | 1,030 | 472,5 | 515,00 | 23,60 | 17,50 | |
| 01/06/2023 | 500 | 0,980 | 455 | 490,00 | 22,75 | 17,50 | |
| 01/12/2023 | 500 | 0,790 | 420 | 395,00 | 21,90 | 35,00 | |
| 01/06/2024 | 500 | 0,730 | 370 | 365,00 | 20,20 | 50,00 | |
| 01/12/2024 | 500 | 0,580 | 320 | 290,00 | 17,80 | 50,00 | |
| 01/06/2025 | 500 | 0,550 | 270 | 275,00 | 15,40 | 50,00 | |
| 01/12/2025 | 500 | 0,380 | 220 | 190,00 | 13,00 | 50,00 | |
| 01/06/2026 | 500 | 0,430 | 170 | 215,00 | 10,60 | 50,00 | |
| 01/12/2026 | 500 | 0,160 | 120 | 80,00 | 8,20 | 50,00 | |
| 01/06/2027 | 500 | 0,110 | 70 | 55,00 | 5,80 | 50,00 | |
| 01/12/2027 | 0 | 0 | 70 | 0,00 | 0,00 | 70,00 |
It would be really helpful if you could outline the exact steps to reflect this scenario accurately.
Remember that âCash Flow â Interestâ represents gains, while âCash Flow â Amortizationâ reflects capital reduction.
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