How to invest in alternative investment market (AIM) shares

Written by dirk huds Google
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How to invest in alternative investment market (AIM) shares
The AIM exchange was established in 1995. (Stockbyte/Stockbyte/Getty Images)

AIM is a sub-category of the London Stock Exchange. Unlike the primary exchanges, the FTSE 100 and FTSE 250, AIM has a looser regulatory framework, allowing smaller companies to raise capital for growth. This potential for growth is what attracts investors to purchase AIM shares, but, as with all investing, they should exercise caution, as the market can be volatile.

Skill level:

Things you need

  • Capital
  • Broker

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  1. 1

    Research the companies you wish to invest in. One of the features of the AIM market is that reliable evidence of performance is often difficult to source. This adds to the potential volatility of the market.

  2. 2

    Check whether the company is listed on any other stock exchange aside from AIM. If it is you may be able to place it in a stocks and shares ISA. Shares in an ISA are exempt from capital gains tax (although you lose the inheritance tax relief). As of 2013, regular AIM shares, listed on the one stock exchange, cannot be placed in an ISA.

  3. 3

    Contact your broker to make the purchase. The London Stock Exchange website has a list of registered brokers. The broker will liaise with a Nomad (Nominated advisor). The Nomad is the licensed agent that the company employed to guide their entry onto the AIM exchange. Nomads also serve as regulators; they ensure companies abide by the rules of AIM trading.

  4. 4

    Make sure you receive written evidence of your investment. Your broker should issue with a share certificate -- either in writing or electronically -- listing the number of shares purchased, the rice per share, the total investment amount and the date the transaction was made.

  5. 5

    Be advised that AIM shares can be exempt from inheritance tax. As long as you have held the stock for two years or more, you will be able to pass them onto your next of kin tax-free should you die. Shares on the regular stock exchange are subject to inheritance tax.

  6. 6

    Know that AIM shares also benefit from capital gains tax depreciation for every year that you hold them. For each 12-month period you hold an AIM listed share, the capital gains tax you pay when you sell them falls by five percent.

  7. 7

    Invest in a managed fund with exposure to the AIM market to spread your investment. Many brokers offer funds that invest in a number of AIM companies or a mixture of AIM and FTSE100 businesses. You will pay a fee for the management of the fund, but will benefit from the expertise of the manager who buys and sells the shares held in the fund.

Tips and warnings

  • Many online brokerage firms do not offer exposure to the AIM market. However, the Internet is a good place to source company data as you conduct your research.
  • The value of your investment can go down as well as up. Particularly in the AIM market, where many companies are not yet established as viable going concerns, you risk losing all your capital if the company fails.

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