Markets and Indices

Celticheart Investor

A beginner's guide to trading and investing

When it comes to investing one of the most important considerations is which markets do you invest in. By that I mean do you invest in the main stock markets such as the Footsie which tend to be better regulated and more stable or do you invest in one of the smaller markets such as AIM http://www.londonstockexchange.com/companies-and-advisors/aim/aim/aim.htm which is made up of smaller cap companies and is without doubt a more volatile market? Ultimately it comes down to your approach to investment and risk.  

AIM is, at least according to their website, the most successful growth market 
in the world. Since its launch in 1995, over 3,000 companies from around the world have chosen to join AIM. 

There are of course many indices in the UK stock markets: 

• FTSE 100
• FTSE 250
• FTSE 350
• FTSE All-Share
• FTSE AIM All-Share
• FTSE techMARK All-Share
• FTSE SmallCap
• FTSE Eurotop 300
• Ethical Indices

The main markets are more stable with generally a far higher share price, particularly in the Footsie 100, the growth rate might not be spectacular but the risk is generally far less (although nothing is certain in today's market) and you are far more likely to get a dividend paid on your investment.

The added advantage of investing in the main markets is that they are ISA allowable, whereas previously AIM stocks have not been although looks like it is about to change as is explained below: 

During the recent budget announcement, George Osborne announced that from April 14th next year no stamp duty will be payable for shares that are listed on AIM and other so called "growth" markets (currently 0.5% duty on all markets). He also said that he was in consultation over the allowance of AIM shares into stocks and shares ISA, this has now been approved and will become allowable from 5th August this year.

Until now the only AIM stocks that were allowable were those that were dual listed e.g. listed on both AIM and ASX http://www.asx.com.au/ or AIM and ISE http://www.ise.ie/

It is also worth bearing in mind that these share are not subject to inheritance tax, provided they have been held for at least two years.

I am restricting my market listing to those in the UK as, for most small investors in this country that is where they choose to invest, even though the companies they invest in can also be listed on other global markets.

One thing I have noticed is that investors who frequently monitor their holdings rarely seem to look at the overall performance of their Indices. This year I think it is fair to say that the smaller markets have taken a real hammering and have been seen as very Bearish but recently all of the UK Indices Ichimoku Trader on http://www.ichimokutrader.com/ seem to be indicating a Bullish trend or Bull run is imminent. I sincerely hope that they are right.

Footsie 100 (Chart courtesy of amCharts.com)

AIM (Chart courtesy of amCharts.com) 

A cautionary note, trading and investing in shares carries a level of risk, these blogs are only meant as a basic guideline to investing and trading, always do your own research and base your decisions on what you can afford to lose. This blog is not intended to provide financial advice as I am not qualified to do so, it is simply designed to provide information about how the markets work that might be of some help to private investors like myself.