That is one advantage of on-branch distributed bug tracking. One advantage you also get, which is more important on large projects, is knowing which bugs have had their fixes merged into the branch you are working on. This is a bit unwieldy with just text TODO files since you have to keep finished TODOs around and then merge them, usually manually solving conflicts, as changes move between branches. For this purpose I use a dedicated distributed bug tracker https://github.com/travisb-ca/nitpick after I had evaluated pretty much all the alternatives.

For a very small team a simple text file can work, but for teams of more than a handful some tool support is necessary.