There is an obvious downside to a set-and-forget strategy. Putting money in stocks is hardly sticking it under a mattress - any equity market clearly holds substantial risk. People argue that Aim is more risky than the main market because of its lighter-touch regulation, particularly its lack of prescriptive entry criteria and the criticised role of nominated adviser or 'nomad', which both brings companies to market and regulates them.
They can point to the latest Aim calamity - Globo (GBO) and Quindell (QPP) spring to mind - as proof. Most notorious in recent times have been the governance blowouts at certain Chinese companies, prompting the London Stock Exchange to remind all nomads for businesses based in the country of their obligations. The LSE is also proposing to double the amount of cash raised by new Aim entrants in an effort to increase investor scrutiny of 'cash shells' coming to market.
But whether or not there is any greater risk across the board, Aim has certainly underperformed its closest comparator, the FTSE Small-Cap index, over the past three years (year-to-date, interestingly, the two have moved much more closely). It has long been the contention of this title that there are good growth opportunities on Aim if you know where to look - often allowing readers to 'get in on the ground floor' with a blossoming company.
Two years ago, after Aim holdings were allowed into individual savings accounts (Isas), we set out a range of ideal Aim portfolios including core value, growth and income strategies. The growth portfolio, which is seen in the accompanying table, delivered an average total return - that means including dividends - of 37.8 per cent since the articles publication in October 2013. That compares with the 4.1 per cent loss of the FTSE Aim All-Share index over that period.
| Our Aim ideal portfolio growth picks | ||
|---|---|---|
| Name | TIDM | Total return |
| Dart | DTG | 102.9% |
| Walker Greenbank | WGB | 44.4% |
| Staffline | STAF | 144.8% |
| Stanley Gibbons | SGI | -65.5% |
| Noble Investments (UK) | Formerly NBL | 2.2% |
| Matchtech | MTEC | -2.0% |
| Average | - | 37.8% |
| FTSE Aim All-Share | FTSEAIM | -4.1% |
The biggest capital gains were produced by Staffline (STAF), the welfare-to-work provider that has done so well out of the government's compulsory work experience scheme for the long-term unemployed. While Dart's (DTG) continued success selling packaged holidays has also seen its share price march on over the period. The laggard was clearly stamp and coin dealer Stanley Gibbons (SGI), a long-term underperforming buy tip that we finally exited earlier this month.
The companies team also presented their favourite value stocks, which provided an average total return of 34.9 per cent over the same period. This was despite including Gulf Keystone Petroleum (GKP). Pumps and motor manufacturer Hayward Tyler (HAYT) has benefited from a rise in the number of power plants that use its products.
The rise in housebuilding and infrastructure spending over the period arrived just in time for aggregates, concrete and asphalt producer Breedon Aggregates (BREE). Shareholders in another value tip, Ashcourt Rowan (formerly ARP), profited nicely from its purchase by Towry Finance at 270p a share, that being a premium of 60 per cent to its closing price of 169p at the end of January this year.
We also selected some income plays, which have returned an average total return of 25 per cent. But to show we are human, our blue-chip picks lost 2.1 per cent over the period, and our high-risk blue-chip picks failed more often and more completely than they succeeded, losing an average 16.3 per cent.
Which fits rather nicely with our reader's situation. A diversified portfolio stuffed with straightforward companies can hold its own on Aim, and losing one battle may not mean the entire enterprise is lost. But no set of positions will be immune to attack.
