How to Track and Calculate SGB Returns
Sovereign Gold Bonds (SGBs) are government-backed securities that allow you to invest in gold without physically holding it. They offer a fixed interest rate, paid semi-annually, along with the potential for capital appreciation as gold prices change over time. In this post, we’ll show you how to track your SGB investments and calculate the XIRR, which accounts for both the interest earned and the change in the bond’s value, giving you a true picture of your investment returns.
To track your SGB investments in FinBodhi, start by setting up two accounts:
- Gold:SGB – This Asset account represents the value of your SGB holdings. When creating this account, select Type as Metal and then Instrument as Gold 999. This tells FinBodhi to treat each unit as 1 gram and automatically use the IBJA gold rate to track the latest price.
- Interest:SGB – This Income account will be used to credit the semi-annual interest payments to your bank account.
For detailed steps on setting up accounts, see the Getting Started with Accounts page.
Once your accounts are ready, you can start recording transactions. When you purchase SGBs, the money moves from your broker account (e.g., Broker:Zerodha) to your Gold:SGB account, specifying the quantity and purchase price per unit. Interest payments are credited from your Interest:SGB income account to your bank account (e.g., Checking:SBI). The example transactions below illustrate both SGB purchases and interest credits over time
At this point, you can visit the Balance page to view your Gold:SGB balance, along with metrics like XIRR and unrealized P&L. However, these figures won't yet account for the interest you've received. To include interest in your calculations, navigate to the Gold:SGB account page, go to the Settings tab, and establish a relationship with the Interest:SGB account. Once this relationship is set, FinBodhi will incorporate the interest into your calculations, and the Balance page will display the correct realized P&L and an accurate XIRR.
For a detailed explanation of account relationships and how they affect XIRR calculations, please refer to the Calculating XIRR page.