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.
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.
-
M&S shares shift from frumpy to fabulous as pre-tax profits are up by 56%
M&S is performing strongly and has announced it will pay a dividend for the first time since the pandemic.
By Dr Matthew Partridge Published
-
The rise and fall of Sam Bankman-Fried – the “boy wonder of crypto”
Why the fate of Sam Bankman-Fried reminds us to be wary of digital tokens and unregulated financial intermediaries.
By Jane Lewis Published
-
M&S shares shift from frumpy to fabulous as pre-tax profits are up by 56%
M&S is performing strongly and has announced it will pay a dividend for the first time since the pandemic.
By Dr Matthew Partridge Published
-
The rise and fall of Sam Bankman-Fried – the “boy wonder of crypto”
Why the fate of Sam Bankman-Fried reminds us to be wary of digital tokens and unregulated financial intermediaries.
By Jane Lewis Published
-
Three defence stocks set to flourish in an era of instability
A professional investor tells MoneyWeek where he’d put his money. Tom Bailey highlights three defence stocks that look promising.
By Tom Bailey Published
-
EasyJet shares are volatile but enticingly cheap
The EasyJet group has shrugged off the cost-of-living crisis, restarted dividends and shares look good value.
By Dr Matthew Partridge Published
-
The fallout from the war on landlords
Investors fleeing the market and the rise in rents are affecting us all.
By Charlie Ellingworth Published
-
Eight small-cap trusts to bet on
Funds investing in market minnows are out of favour, but the cycle will turn. Here are the best bets.
By Max King Published
-
Trust in US TIPS to beat inflation
In an inflationary market TIPS, the US Treasury Inflation-Protected Securities are most compelling says Cris Sholto Heaton.
By Cris Sholto Heaton Published
-
What is Vix – the fear index?
What is Vix? We explain how the fear index could guide your investment decisions.
By Dr Matthew Partridge Published