We all desire to own the best-performing companies in our portfolios. I know firsthand the self-indulgent pleasure of tallying up the number of personal holdings featured in a given year's list of top returners. On the other hand, one should be careful about what they wish for… these booming ASX 200 shares are sometimes saddled with quaking volatility.
To set the scene, the S&P/ASX 200 Index (ASX: XJO) pushed 7.8% higher last year. Among the 200 constituents, 17 companies graced their shareholders with mindboggling returns above 50% during the 12-month timeframe.
The Aussie investment handing out the greatest return in 2023 was Neuren Pharmaceuticals Ltd (ASX: NEU), with a jaw-dropping 214% gain. However, shareholders were subjected to enormous single-day moves in the process. Shares in the neurological drug developer rocketed 72.5% in a single session.
Not everyone can, nor wants to, stomach an investment capable of moving at that pace.
So, was there an alternative in 2023?
The quiet achievers of 2023
After compiling the top-performing ASX 200 shares of last year, I calculated their respective annualised volatilities. This essentially quantifies the magnitude and regularity of share price movements every week for the entire year.
| ASX-listed company | 2023 Price Change | Annualised Volatility |
| Neuren Pharmaceuticals Ltd (ASX: NEU) | 214.1% | 0.91 |
| Ramelius Resources Ltd (ASX: RMS) | 81.2% | 0.52 |
| Boss Energy Ltd (ASX: BOE) | 89.2% | 0.47 |
| Emerald Resources NL (ASX: EMR) | 154.0% | 0.42 |
| James Hardie Industries Plc (ASX: JHX) | 114.0% | 0.33 |
| Collins Foods Ltd (ASX: CKF) | 64.7% | 0.33 |
| Boral Limited (ASX: BLD) | 86.5% | 0.28 |
| Pro Medicus Limited (ASX: PME) | 73.4% | 0.28 |
| Smartgroup Corporation Ltd (ASX: SIQ) | 71.0% | 0.27 |
| Seven Group Holdings Ltd (ASX: SVW) | 76.0% | 0.22 |
| ASX 200 Index (benchmark) | 7.8% | 0.12 |
Although Neuren took out the top spot for returns in 2023, it also racked up the highest volatility among top-performing peers. Instead, most of us desire large returns and little volatility. In this area, both James Hardie and Emerald Resources provided more appealing return-to-volatility ratios.
For instance, the building materials company — James Hardie — achieved more than half the return of Neuren at nearly a third of the volatility. Similarly, the gold explorer — Emerald Resources — provided 72% of Neuren's return with less than half the volatility.
If maximising the smoothness of the journey was the goal, Seven Group, Smartgroup, and Pro Medicus coasted through 2023 with far fewer unsettling share price swings.
Impressively, Seven Group — an Aussie investment group housing media, mining, and construction businesses — still outpaced the index by nearly tenfold despite it generating roughly only twice the bumpiness of the ASX 200.
Benefits of less volatile ASX 200 shares
The obvious perk of reduced volatility is less time feeling like your heart is in your throat. Investing can induce emotionally charged decisions in even the most experienced partakers. A high level of volatility can emphasise this more so.
If a company's share price tends to move slowly, it could mean a better night's sleep and a more rational approach. It's often those sudden and dramatic price changes that invoke regrettable reactions.
Finally, research suggests low volatility stocks historically deliver similar or better returns to their wayward counterparts. Did someone say, "Have your cake and eat it, too"? But, it's important to remember that past volatility will not inform future volatility.
