Announcing the Contribution Analysis Report
The Contribution Analysis Report explains the drivers behind your portfolio’s performance, be they stock selection, asset allocation, or exposure to certain countries, sectors, or industries.
This type of analysis is also referred to as performance attribution and is important for investors because it provides an explanation of how your returns are derived and critically, where your portfolio tracks or diverges from the benchmark. As any experienced investor knows, significant outperformers and underperformers mask the real factors behind your historical performance.
We’ve packed a great deal of flexibility into the Contribution Analysis Report – you can view contribution analysis at the individual stock level, or roll up to various categories – including the Custom Groups you’ve created. The report can be run across the entire history of your portfolio or a specific time period.
Here’s an example of the Contribution Analysis Report using my portfolio over the past six months. In the first screenshot, I’ve chosen to view the individual holdings. It’s immediately clear which positions have contributed to (and detracted from) my total return, and by what degree.
Ozforex (OFX) really stung me, but Amazon (AMZN) and Alumina (AWC) helped. I can also see that Xero (XRO) and my position in a global healthcare ETF (IXJ) weighed me down.
But was it Amazon the company, or the tech sector in general that gave my portfolio a lift? Should I rebalance my portfolio towards Aussie resources, or is there something about Alumina (or aluminium) that explains that particular gain?
Switching to the Industry Classification view provides the answer. The aluminium industry has done well, but the general metals/mining space has done better – a fact not apparent on the individual holdings view.
More surprising is that my exposure to Financial Conglomerates (Berkshire Hathaway and Magellan Financial) has given my portfolio the biggest boost – contributing almost 20% of my total return. Maybe it’s the global blue chips inside those holdings that are really providing alpha.
Since I like to invest in companies I follow closely and in specific themes, and because companies don’t always fit into sector or industry classifications, I use Custom Groups to apply my own particular worldview. Doing so is constructive because it shows me that my macro ideas are generating positive returns on the whole. My “Core” investments are doing exactly as I’d hoped, but surprisingly my tech shares are contributing the least.
We hope you enjoy the Contribution Analysis Report – as always we’d love to hear your feedback via our Community Forum.
UPDATE - 9 Nov 2017) – You may now run a Contribution Analysis Report on a Consolidated View.
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