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Guide to Trading UK Small Caps (AIM) Shares
The Alternative Investment Market (AIM) is a sub-market of the London Stock Exchange, allowing smaller companies to float shares with a more flexible regulatory system than is applicable to the Main Market. The AIM was launched in 1995 and has raised almost £24 billion for more than 2,200 companies. Flexibility is provided by less regulation and no requirements for capitalisation or number of shares issued. Some companies have since moved on to join the Main Market, although in the last few years, significantly more companies transferred from the Main Market to the AIM (The AIM has significant tax advantages for investors, as well as less regulatory burden for the companies themselves).
Why to trade AIM shares
The Alternative Investment Market (AIM) allows investors to trade small but fast growing companies. Thanks to the regulatory conditions and significant tax advantages AIM is very attractive for rich and experienced investors from around the world.
Private investors should treat AIM shares with extra vigilance as the share price can be very volatile and open to lots of speculation. Besides that usually the spread (difference between ask and bid prices) is very high compared to FTSE100 and FTSE250 shares. As of this it's strongly advisable for amateur investors to avoid them, at least till they learn more.
Where to trade AIM shares
Every financial spread betting, contracts for difference (CFDs) and some share dealing brokers allow clients to buy and sell AIM shares. It is crucial to use the right investment vehicle as they offer different benefits and not suitable for everybody.
- Financial Spread Betting is a leveraged product, tax exempt and lets you go long or short. For more information refer to financial spread betting guide or compare spread betting accounts.
- Contract For Difference (CFD) is also a leveraged product, lets you go long or short, but unlike spread betting is not tax exempt. For more information refer to contract for difference guide or compare CFD accounts.
- Share dealing is the most common way to invest money in the stock market. Usually share dealing is not leveraged (although some stockbrokers have credit accounts) and incurs capital gains tax. Learn more about stock brokers and compare share dealing accounts.
Additional Information
- Financial Times - official website of Financial Times
- LSE - official website of London Stock Exchange