Investing

How to use the Cash Flow Tool

  • 05.SEP.2019
  • Sara Lewis,  XTB

The Cash Flow Tool is designed to help you easily estimate the cash flows associated with a single or portfolio of XTBs.  Our step-by-step guide takes you through the tool and explains each of its elements.

Note: Data included in all XTB website tools is from the previous business.  

The calculation of cash flows from XTBs can be completed in 3 easy steps:

Step 1: Select XTBs

You can select a single XTB or build a portfolio of up to 10 XTBs.

Selecting a single XTB

Click the CREATE YOUR OWN portfolio button. Then select the XTB you want from the list.

Click ADD TO PORTFOLIO to drop each XTB into the Cash Flow Tool. If you select the wrong XTB, just de-select and choose an alternative. The CREATE YOUR OWN portfolio function allows you to select up to 10 XTBs.

Select a portfolio of XTBs

Many investors have asked for help in building a portfolio of XTBs. Our CIO, Ian Martin has built a range of pre-selected portfolios to assist investors:

  • Interested in the highest yielding XTBs?
    Choose the HIGH YIELD portfolio for five of the highest YTMs in our range.
  • Want to build a bond ladder portfolio with one bond maturing each year?
    Choose the MATURITY LADDER portfolio for five XTBs that mature between 2019 and 2023.
  • Want a portfolio of floating-rate XTBs?
    Choose the CASH PLUS portfolio for a selection of three floating-rate XTBs. This portfolio pays income every month.
  • Use the CREATE YOUR OWN button to choose up to 10 XTBs – e.g. to select the three highest yielding XTBs, or you know the specific bonds you want.

 

Now you’ve selected your XTBs you’ll see a screen similar to this:

If you built your own portfolio, you can still add or remove XTBs:

  • To remove an XTB, click the ‘X’ on the top right of the issuer logo
  • To add another XTB click + ADD MORE to return to the list of XTBs to select another.

 

NOTE: The XTBs you’ve already selected will have green ticks next to them. If you’ve selected a pre-built portfolio you cannot add or remove individual XTBs.

Did you know? The average XTB investor holds 3 XTBs

 

Step 2 – Enter Investment Amount

Most investors know how much they want to invest across their XTB portfolio and split it evenly across their XTBs. If that’s you, simply enter your investment amount in the blue box at the top of the screen. The Cash Flow Tool will split this equally between your selected XTBs.

Note: Your investment amount needs to be in whole numbers only. No dollar signs or commas.

Your total investment will be rounded down to the nearest whole XTB unit. For example, $50,000 into a HIGH YIELD portfolio would actually result in an investment of $49,676.34 (as at 20 September 2018). Again, the tool does all the work for you to determine how many full units you can purchase.

Note: You can still add or remove XTBs from your portfolio. If you’ve entered a ‘Total Investment Amount’ the Cash Flow Tool will amend the allocation between your revised portfolio.

Step 3: Generate Your Individual XTB Cash Flow

Once you’re happy with the XTBs and the amount you’re investing, simply click CALCULATE CASH FLOW for the really clever part.

At the top of the screen you’ll see a bar chart showing the income your portfolio will generate. It displays the income payments an XTB investor will receive in each of the selected XTBs. This default view displays the income of the portfolio from now through to maturity. So if you have XTBs in your portfolio that mature up until 2027, you’ll see an income amount in each year until 2027.

Each XTB is shown in a different colour so it’s simple to identify the contribution of each XTB to each annual cash flow. Hover your mouse over any of the bars to see which XTB relates to this income payment.

For more detail of each income payment click on a specific year in the X axis. This will display a graph of income payments across the 12-month period. For clarity, each XTB retains its same colour code. And again, you can hover over any bar to see the exact date in the month that the income will be paid.

Click “close year” to return to your lifetime income chart.

Note: Bonds are generally considered a buy-and-hold investment. The Cash Flow Tool assumes you will hold your XTBs until they mature. However, one of the key benefits of XTBs being traded on ASX is that if your plans change and you need that money, you can sell at any time.

Portfolio Detail Table Explained

The table under the graph shows key information about your XTBs. The XTB ticker code needed to purchase via your broker is displayed for each XTB in your portfolio, along with:

  • Number of units of each XTB in this portfolio,
  • Total income per XTB for the life of this portfolio and,
  • The Face Value you’ll receive back at maturity per XTB.

 

Please note: All XTBs mature at $100 (link to premium bonds article)

Cash Flow Income and Capital Summary Table

At the bottom of your Cash Flow Results page you’ll find a really useful overview of the income and capital generated Annually and In Total.

The first line shows the amount you invested (e.g. -$49,676.34). Remember, your total investment amount was rounded down to purchase as many XTB units as possible.

The INCOME column displays the total income (income payments via distributions) from this portfolio. The CAPITAL column shows the Face Value of each XTB unit ($100 per unit) received after each XTB matures. Each of these is displayed annually so you have a clear picture of the cash flow from this portfolio.

At the bottom of the table the TOTAL AMOUNT – Income and Face Value is displayed in bold. This tells the total return of your investment. In this example an investment of $49,676.34 will give you a total return of $58,406.71

Still want to change your portfolio? That’s fine – use the relevant buttons to amend either the investment amount or to start again with a new portfolio.

What about fees?

XTB fees are included within the offer (or sell) price shown on ASX. XTB fees are referenced to the Face Value ($100) rather than the XTB price. Find out more about XTB fees

Keep a copy on file

Like what you see? If you are happy with your portfolio you can email yourself a copy. This is a handy way to have the XTB ticker codes at hand when you come to buy your XTBs. You’ll need these if you trade via an online broker. If you use an adviser you can send the portfolio to them – we’ve included a CC feature in the email to send a copy directly to your adviser.

Bonds help you sleep at night

Unlike bond managed funds and ETFs, XTBs are an investment in individual corporate bond units. This means the returns shown are predictable. If you buy at the price stated and hold to maturity you will:

  • Receive the income displayed through the life of the bond.
  • Receive the face value of $100 for each XTB unit you hold.
  • This assumes that the bond issue does not default. Whilst this is not zero risk, all XTBs cover top ASX-listed companies so the risk of a default is minimised.

 

Not many other investments can give you that same peace of mind.

Note: Remember all data displayed on the XTB website is from the previous business day close.

Now it’s your turn

Bonds do take a bit of time to get used to – it’s their key features of predictability and certainty that make them very different from shares. That’s exactly why we built this tool for you to play with and get comfortable with how your XTB portfolio will perform. Use it to check out each of our Starter Portfolios or to build your own. When you have a portfolio you are happy with, compare the result with your current fixed income returns. You may be pleasantly surprised.

Don’t forget to email yourself a copy of the portfolio for your records, or to discuss with your adviser.

Remember: Bond ETFs and managed funds can’t give you this level of predictability as they don’t mature.

Whilst TDs do offer this predictability and the government guarantee, you’ll earn more by moving up to bonds.

 

Advanced Features

There are a number of advanced features of the Cash Flow Tool for those who are a little more familiar with how it works.

Allocate a specific investment amount to each XTB

You have $50,000 to invest across 5 XTBs but you want a specific amount in each.

Leave the blue Portfolio Amount box blank and enter the specific amounts one by one for each XTB, as per the image below. For example, you could split your $50,000 with $30,000 in the highest yielding XTB and then $5,000 each across the remaining four.

Temporarily remove an XTB from your Cash Flow Graph

Clicking on an XTB in the key temporarily removes it from the graph. This can help if for example you’ve selected five XTBs but want to see what your income chart would look like without one of them. This does not remove the XTB from the Portfolio Detail and Cash Flow tables. If you decide to remove it permanently, you’ll need to re-build your portfolio without it. Click on the greyed out XTB to return it into the cash flow chart.

Backdate a cash flow for XTBs you’ve already purchased

If you’ve already purchased XTBs you can use the Cash Flow Tool to backdate your calculation. Do this by building a portfolio of the XTBs you hold and then entering the specific unit price you paid and the number of units you purchased for each.

Build a portfolio with a specific number of XTB units

If you want a specific number of units for each XTB, complete the bottom line ‘XTB UNITS’ for each XTB in your portfolio. The total investment amount will automatically update once you’ve entered the number of units for each of your XTBs.

What’s next?

 

Disclaimer
Term Deposits may enjoy the benefit of protection under the Financial Claims Scheme. The information in this article is general in nature. It should not be the sole source of information. It does not take into account the investment objectives or circumstances of any particular investor. You should consider, with or without advice from a professional adviser, whether an investment is appropriate to your circumstances. Australian Corporate Bond Company Limited is the Securities Manager of XTBs and will earn fees in connection with an investment in XTBs. Users of the Cash Flow tool confirm acceptance of the terms of use.

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