Small can be beautiful in difficult times

Uncertainty reigns among UK investors. Will this week’s Budget cuts wither the green shoots of growth? Whatever happened to safety in blue chips when BP’s dividends can vanish into an oil slick? Where’s a stock-picker to turn? If the words ‘small cap’ don’t send you rigid with fright, then there are good reasons to look towards AIM, London’s market for listed smaller companies. You’ll find businesses there that are an unusually good bet in tough times. And you’ll find some that are sufficiently global, despite their modest size, not to flinch at a prolonged UK downturn.

Long time AIM watcher Tom Bulford, author of the Red Hot Penny Shares newsletter, identifies the key time to invest in an AIM-listed company. There are the early ‘fantasy’ years of a company — when it has little more to offer than an idea for a product or service. ‘Almost without exception it takes these companies longer to bring their plans to fruition than they expect.