Explore your portfolio performance with the Contribution Analysis Report
This article tells the story of actual Sharesight users, but the names have been changed to protect their privacy. The Contribution Analysis Report described is available only on the Sharesight Expert plan.
In a previous blog post on how one couple saves and time using Sharesight, we showed how Nick and Katie set up their Sharesight account and save money and time with their accountant. In this blog, we explore how the couple use the Contribution Analysis Report to understand the performance of their portfolio in more detail.
Contribution Analysis Report - explained
Sharesight’s Contribution Analysis Report breaks down the total return of your portfolio by the components that are driving your returns, 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
Setting up custom groups
While you can run the Contribution Analysis Report using any of the Sharesight groupings (sector/industry/country), investors like Nick and Katie use Sharesight’s Custom Group feature to view their performance across their asset allocation strategy.
With a target asset allocation in mind for both their personal investments and SMSFs (weighted towards equities) they both set up Custom Groups within Sharesight. After they set up their Custom Groups, they allocated each of their holdings into one of the categories:
Cash and Other
They use these buckets to keep track of their asset allocation strategy.
Using the Contribution analysis report
With the contribution analysis report, they are able to dive deeper into the performance of each of their holdings by various groupings to stay on top of their portfolio.
Which asset class contributed to overall return?
At a high level, looking at the performance of their asset classes for the calendar year, it’s clear that Equities have performed the best in terms of income plus capital growth.
Nick and Katie’s SMSF personal portfolio contribution analysis report graph
Looking at the chart above, Equities contributed the most in terms of overall return, followed by Alternatives, Real estate and finally Cash and cash equivalents in this calendar year.
Diving a bit deeper into the Equities part of their portfolio, they can look at which holdings in each of their custom groups contributed to their overall return - evaluated through the prism of capital gains, dividend and currency gains.
How much did each holding contribute to overall return?
To calculate the contribution of each holding, they select the “do not group” option in the report setting, to evaluate how each holding in their portfolio contributed to overall performance.
In the screenshot below, you will see the contribution of each holding in their portfolio, sorted in descending order.
There are multiple other ways in which to look at the contribution analysis report.
One other way Nick looks at his overall performance is by running the contribution analysis report on a consolidated view. A consolidated view is a way to look across multiple portfolios in a single view. All portfolios must be of the same tax residency to create a consolidated view.
In the screenshot below, you can see that Nick and Katie have got 3 different portfolios setup based on tax entities. The portfolio names are: Katie’s picks, Nick and Katie SMSF and Nick’s LICs.
Some other notes while looking at the contribution analysis report:
The sum of the absolute values of the contribution percentages should equal a 100%. For example, you need to ignore the negative signs and add the percentage numbers to arrive at 100%
You can sort the order in which the holdings are presented by clicking on the header row - by holding name, capital gains, dividends, currency, total return or contribution
You can change the period of reporting by using any of the options in the date picker in the report
You can run the contribution analysis report on a consolidated view as well. You can use the “group by portfolio” option to look at how each of your portfolios contributed to your overall return
Contribution Analysis Report video
For a deeper dive into Sharesight’s Contribution Analysis Report, watch this walkthrough video.
Sharesight takes the admin burden out of investing
If you, like Nick and Katie, are tired of tracking multiple investment portfolios across spreadsheets and wasting time on end-of-year admin with your accountant that could be better spent looking at your investment situation, now is the time to try Sharesight, built by investors for investors. With Sharesight you can:
Get the true picture of your investment performance, including the impact of brokerage fees, dividends, and capital gains with Sharesight’s annualised performance calculation methodology
Sign up for a FREE Sharesight account and get started tracking your investment performance (and tax) today.