Why Aim stocks are for stockpickers
Aim, the UK’s market for growth stocks, has had a respectable five years, but returns are driven by a few winners.

When Aim reached its 20th anniversary in 2015, most investors were not reaching for the Champagne. Nearly three quarters of firms listed on the London Stock Exchange’s market for growth companies had lost money for shareholders, according to research at the time by Elroy Dimson and Paul Marsh of London Business School. Almost one in three firms lost 95% or more of their initial value. Overall, the FTSE Aim All-Share index was down by around 20% since inception, at a time when the FTSE 100 had almost doubled.
The subsequent five years have been better. The FTSE Aim All-Share has returned 21% (including dividends), while the FTSE 100 has returned 6.4%. It’s true that success has been unequal: only about 30% of firms have seen their shares rise, while 50% are showing losses (the rest haven’t been listed for the full five years). Just 10% are up by as much as the 21% average for the index (I’m ignoring dividends, but it won’t make much difference). Still, you expect returns to be skewed towards a few winners when investing in growth stocks, so that’s not a big problem.
Aim – a strange hybrid
Optimists will see this as evidence that Aim has matured. The first 20 years included the dotcom and mining booms – with all the attendant manias and frauds – which made it an exceptionally bad time, so the last five years look good by comparison. Aim has still seen some blow-ups recently – most notably the failure of bakery chain Patisserie Valerie in 2018 – but nothing on a par with those days.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Nonetheless, this market remains a strange beast. Many of the most popular Aim companies are not small growth stocks: some were once, but are now well established (online fashion retailer ASOS is an obvious example), while others are mature firms that list on Aim because they prefer its lighter regulation. These often trade at steep valuations because of their use in inheritance tax (IHT) planning (you don’t pay IHT on qualifying Aim stocks). Conversely, fewer good companies go to Aim for capital – they can get it via other means. So listings are a way for early investors and founders to exit or lesser firms to raise money.
Hence Aim remains a small number of good stocks amid a great deal of dross. There is no tracker fund for Aim (low liquidity and wide spreads would make it very hard to run one), or for smaller UK stocks generally (the iShares MSCI UK Small Cap ETF is in effect a FTSE 250 tracker). After 25 years, UK small caps remain a good hunting ground for stockpickers, but a missed opportunity for investors who want broad exposure to growth opportunities.
Sign up for MoneyWeek's newsletters
Get the latest financial news, insights and expert analysis from our award-winning MoneyWeek team, to help you understand what really matters when it comes to your finances.
Cris Sholto Heaton is an investment analyst and writer who has been contributing to MoneyWeek since 2006 and was managing editor of the magazine between 2016 and 2018. He is especially interested in international investing, believing many investors still focus too much on their home markets and that it pays to take advantage of all the opportunities the world offers. He often writes about Asian equities, international income and global asset allocation.
Cris began his career in financial services consultancy at PwC and Lane Clark & Peacock, before an abrupt change of direction into oil, gas and energy at Petroleum Economist and Platts and subsequently into investment research and writing. In addition to his articles for MoneyWeek, he also works with a number of asset managers, consultancies and financial information providers.
He holds the Chartered Financial Analyst designation and the Investment Management Certificate, as well as degrees in finance and mathematics. He has also studied acting, film-making and photography, and strongly suspects that an awareness of what makes a compelling story is just as important for understanding markets as any amount of qualifications.
-
Watch out for fake Steven Bartlett video – you could lose thousands
Scammers are trying to tap into the Trump tariffs chaos, but knowing what to look out for could save you thousands of pounds, says Kalpana Fitzpatrick
By Kalpana Fitzpatrick
-
Can Donald Trump fire Jay Powell – and what do his threats mean for investors?
Donald Trump has been vocal in his criticism of Jerome "Jay" Powell, chairman of the Federal Reserve. What do his threats to fire him mean for markets and investors?
By Katie Williams
-
Out of America's shadow: Why Trump's tariff chaos may be good for non-US stocks
Opinion Upending global investment and trade could benefit other countries at the expense of the US market, says Cris Sholto Heaton
By Cris Sholto Heaton
-
BP's 'long, painful decline' – and why next year could be even tougher
Opinion Long-suffering shareholders in oil giant BP have been pushing for change. It won’t come soon enough, says Matthew Lynn
By Matthew Lynn
-
Investment trusts tap the profits in exotic and obscure global markets
Opinion Peter Walls, manager of the Unicorn Mastertrust fund, highlights three investment trusts as he shares where he'd put his money
By Peter Walls
-
Falling revenues and mounting debt spell trouble for Jumia Technologies
Struggling African e-commerce platform Jumia Technologies looks headed for the exit, says Dr Matthew Partridge.
By Dr Matthew Partridge
-
Next reports £1 billion in annual profits for the first time – what's next for the retailer?
Clothing retailer Next has become only the fourth member of its sector to surpass £1 billion in annual profits. What does this mean for the company's future?
By Dr Matthew Partridge
-
Best of British bargains: cash in on undervalued companies in the UK stock market
Opinion Michael Field, Chief Equity Market Strategist, EMEA, Morningstar, selects three attractive UK stocks where he'd put his money
By Michael Field
-
Building firm Keller presents low debt and ample scope for growth
Geotechnical contractor Keller, which supports vital global infrastructure, boasts rising profits and a cheap valuation
By Dr Mike Tubbs
-
PZ Cussons share price down 75% in last decade – why it's one to watch
Opinion Once-strong consumer-goods business PZ Cussons is out of favour with the market. That spells opportunity for investors, says Jamie Ward
By Jamie Ward