one of our Aim shares fell almost 10% on Monday. But look what he did next
The stock market had a bad day on Monday: the FTSE 100 fell 2.6%. But some of the Aim-listed stocks in our inheritance tax portfolio have done much worse.
Volex, the portfolio’s best performer since its purchase, lost 9.6pc, while TinyBuild fell 7.7pc and Naked Wines lost 6.8pc. FD Technologies, formerly First Derivatives, was 6.7% in the red. Others to fall more than 5% were RWS, Brooks Macdonald, Jet2 and Tekmar.
Only two of our 25 holdings gained: Michelmersh by just 0.8pc and Tristel by 4.3pc meatier. The portfolio as a whole lost 3.5%, a third more than London blue chips.
Questor can’t pretend to be surprised – indeed, seeing Aim stocks amplify the move in their larger counterparts is exactly what we would expect. When the markets get scared, as we pointed out on Wednesday, it’s always the most speculative stocks that suffer the most. And while not all of Aim’s ventures can be called speculative, that’s certainly how the market is viewed. That alone may be enough to encourage nervous investors to sell.
We also pointed out that it is the higher value stocks that are most at risk and that Aim had certainly performed much stronger than the FTSE 100 in the wake of the pandemic, so it was arguably primed for a correction. The blue chip index has only just recovered to its level from the day before the pandemic, while the FTSE Aim 100 index had exceeded its own pre-Covid levels by more than a third as early as the end of last summer.
Since then, it has fallen and is now around 10% higher than in February 2020, when the virus took all markets down. The average stock in our portfolio (including current and past holdings) has gained 21.3% since its purchase, compared to 37.1% when we published a performance summary in June of the year latest, which shows that our own picks have largely mirrored trends in the broader Aim market.
Questor’s goal today is simply to remind investors that this volatility – both day-to-day and year-to-year – is an integral part of investing in higher-value stocks. small for their promise of faster growth.
Our advice can only be to grit your teeth on days like Monday, when some of your Aim stocks can lose a tenth of their value, expecting sharp moves in the other direction before long. And the next day, Volex has indeed increased by 3.5%, followed by 5.5% on Wednesday.
Investing for inheritance tax exemption is automatically a long-term endeavor and savers will at least have time to get over those chills.
The online fashion store is not part of our inheritance tax portfolio, but we have pointed it out to a wider readership for its growth prospects. However, Asos would qualify for the exemption, according to Fundamental Asset Management, a specialist in investing in Aim shares for IHT purposes, so some readers may hold it in their own inheritance tax portfolios.