Risk Summary

Estimated reading time: 2 min

Due to the potential for losses, the Financial Conduct Authority (FCA) considers this investment to be high risk.

What are the key risks?

1. You could lose all the money you invest

• If the business you invest in fails, you are likely to lose 100% of the money you invested. Companies listed on the AIM market may be at an early stage in their operations and/or be loss making, thus increasing their chances of failure.

2. You are unlikely to be protected if something goes wrong

Protection from the Financial Services Compensation Scheme (FSCS), in relation to claims against failed regulated firms, does not cover poor investment performance. Try the FSCS investment protection checker here.

3. You won’t get your money back quickly

• Even if the AIM listed business you invest in is successful, you may not be able to sell your shares immediately, or at the price you paid for them.

• Shares listed on AIM may not have an active market, their value can fluctuate and the difference between their buy and sell prices may be large.

• If you are investing in an AIM listed business, you should not expect to get your money back through dividends. AIM listed businesses rarely pay these.

4. Don’t put all your eggs in one basket

• Putting all your money into a single business or type of investment for example, is risky. Spreading your money across different investments makes you less dependent on any one to do well.

• A good rule of thumb is not to invest more than 10% of your money in high-risk investments.

5. The value of your investment can be reduced

• The percentage of the business that you own will decrease if the business issues more shares. This could mean that the value of your investment reduces, depending on how much the business grows. AIM businesses can issue multiple rounds of shares.

• These new shares could have additional rights that your shares don’t have, such as the right to receive a fixed dividend, which could further reduce your chances of getting a return on your investment.

If you are interested in learning more about how to protect yourself, visit the FCA’s website here.