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What is the Alternative Investment Market?

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  • Written By: Mary McMahon
  • Edited By: Kristen Osborne
  • Last Modified Date: 11 August 2019
  • Copyright Protected:
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    Conjecture Corporation
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The Alternative Investment Market (AIM) is a subset of the London Stock Exchange permitting trade in companies that do not meet the stringent listing requirements for the main stock exchange. These primarily consist of small, growing companies without the capitalization necessary for trading on the London Stock Exchange. Companies can move back and forth between the two exchanges, depending on their needs, and in addition to handling UK companies, the Alternative Investment Market also lists foreign companies.

This market dates to 1995. Regulators use it to create opportunities for growing companies to connect with investors. Investors can provide capital for companies at the ground level, obtaining shares with potentially high values in the future, and companies can use that capital to expand, and theoretically to break through to the London Stock Exchange. Listing requirements for the Alternative Investment Market are very light and the market has minimal regulation, with most companies regulating themselves.

The relaxed standards can make it easier for companies to enter this exchange, but it also carries risks. Investors run the chance of losing their investments or taking big losses, and the stocks traded on the Alternative Investment Market tend to be less liquid. This can make it hard to get out of bad investment positions. The self-regulatory aspect is open to exploitation by companies with unscrupulous managers, and the Alternative Investment Market is not necessarily a good place for an investor who does not have very much experience.

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For an investor with experience who can take the time to research and explore possible investments, this market can provide opportunities. Some companies on the Alternative Investment Market are very strong, with bright financial futures, and they may be good candidates for investment. While others may fade away quickly, investors may still be able to profit from them before they go out of business, and they can use a variety of tactics to identify risky investments and avoid them.

Historically, there was a tax advantage for people participating in the Alternative Investment Market. This is no longer the case due to changes in tax law. People who want to find out about available tax benefits for investments can talk to an accountant or tax attorney to get information, as they may be eligible for incentive programs and other benefits, depending on current laws and policies. For people planning retirement investments, it is especially useful to look at tax benefits associated with certain kinds of retirement accounts.

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