Aim investors look to gold after Isa rule changes
Aim investors go for gold after Isa rule change
One month after investors were first allowed to hold Aim stocks in tax-free Isas, it has emerged that gold miners are among their most popular choices.
By Kyle Caldwell9:47AM BST 03 Sep 2013CommentsComments
Britain’s smallest listed gold companies have been one of the most popular areas of the Aim market since the rules were relaxed last month, according to stock trading website Interactive Investor.
The number of trades in Aim-listed shares doubled followed the change, the company said.
Four of the 20 most bought Aim stocks in August were gold mining companies, Interactive Investor said. The firms, which make their money discovering and then producing gold, have given investors a bumpy ride over the past couple of years, partly because gold shares have heavily underperformed the gold price.
• Tom Stevenson: Should you put Aim shares in your Isa?
Despite this, investors have started to dip their toes back into the sector through the Aim market, which analysts at Interactive Investor put down to the fact that gold prices had enjoyed a strong run over the past couple of months.
Earlier last week gold re-entered a bull market after clocking up a 20pc return over the past two months. It is currently trading just below the $1,400 mark. This has resulted in a surge in demand for Aim-listed gold stocks.
The most popular gold stocks bought for Isa portfolios in August were Condor Gold, Amara Mining, SolGold and Red Rock Resources. All four stocks have made considerable returns over the past month, with Red Rock Resources up 205pc, jumping from 0.4p to 1.22p.
However, investors should bear in mind that what goes up rapidly can also suffer sharp share price falls. Aim shares are typically very volatile and should be bought only if you are an experienced investor who is comfortable with taking risks, experts say.
Other commodity-focused Aim investments proved popular in August, particularly oil exploration companies. Popular stocks included Xcite Energy and Range Resources. But top of the pile was Gulf Keystone, the small oil company – it was the top selling Aim stock in August.
Outside commodities, more recognisable Aim names such as Asos, the online boutique, also proved popular.
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Rebecca O’Keeffe, head of investment at Interactive Investor, said: “Many of our more engaged investors have a bias towards commodity stocks, and these exploration stocks are highly correlated with the underlying commodity prices.
“Gold prices were previously driven sharply lower by the prospect of higher US interest rates in light of the imminent tapering of QE3 or money-printing. However, recent events in Syria have seen gold prices rise again as increased tensions in the Middle East have prompted the market to introduce a ‘geopolitical risk premium’ into the price.”
The Isa rule change, first proposed in the March Budget, is now particularly attractive because it offers the rare opportunity of backing an asset that is protected not only from income tax and capital gains tax but from inheritance tax too.
One of the main reasons the Government has relaxed the tax rules on investing in smaller company shares is the hope it will help boost business and aid the UK’s economic recovery.
Putting shares into an Isa means that any returns and income are tax-free. Outside an Isa, each person gets an annual capital gains tax allowance, which is £10,600 this year. Cashed-in gains larger than that are taxed at up to 28pc, depending on your total taxable income.
In July we revealed the Aim shares tipped by three of Britain’s best stock-pickers ahead of the new rules.