Alternative Investment Market shares (AIMS) when it comes to investing AIMS are still not for the faint-hearted. But if you are in a position to take advantage of them they can provide diversification and potentially enhance portfolio performance for investors.
There was a time when many mainstream investors were fearful of AIM stocks it seemed like the market was full of small mining companies whose volatility was high and failure was likely so the potential gains really were not worth the worry. But more smaller companies appear to be able to punch above their weight says Rebecca O’Keeffe, head of investment at Interactive Investor.
Here five things she thinks you should know about AIMS:
1. The AIM market has its own large-cap indices, including an AIM 100.
2. The performance of the Top 100 is good in recent years.
3. The range of companies is much broader than you may think.
4. When it goes right, it really goes right.
5. More fund managers are covering the AIM market, giving investors plenty of options.
In addition, the AIM 100 lists the top 100 stocks on this junior market by market capitalisation, in the same way, that the FTSE 100 reflects the biggest companies listed in London. Some of those stocks are large with ASOS and Fevertree, both worth billions, occupying the top two spots.
You might imagine that the AIM index is dominated by those at the top, with a long tail of much smaller companies, but in fact, the AIM 100 is less concentrated than the FTSE 100. The top 10 AIM stocks’ weighting is currently 36.9 per cent, compared to an equivalent top 10 weightings of 44.2 per cent for the FTSE 100. And to the end of May, the five-year annualised total return for the AIM 100 is 12.5 per cent, versus 7.1 per cent for the FTSE 100.
AIM shares are an ultra-high risk investment but potentially come with high rewards. Enable’s IFAs of Bishops Stortford are happy to talk to you about the risks and benefits of investing your portfolio broadly.
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