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Investors are being warned about putting money into fledgling firms as nearly one in ten have seen their share price drop by 90 per cent.

Small, new businesses are attractive as their low share prices have the potential to rise quickly. However, companies are more likely to fail in their early years.

Many investors are looking to the Alternative Investment Market — where companies list their shares if they’re not big enough for the FTSE — for growth opportunities.

Risky: A new study found 87 firms listed on Aim saw their share price fall 90 per cent over the past five years

The market has seen major success stories. Once-tiny firms, such as Majestic Wine and online fashion retailer Asos went on to become multi-million pound household names.

But there are many failures. A study by trading firm Banc De Binary found over the past five years 87 firms listed on Aim saw their share price fall 90 per cent. That means if you’d invested £1,000, just £100 would remain.

Since 2013 savers have been able to hold Aim shares in an investment Isa, causing a surge in popularity. But their accessibility means many forget the risks. Ben Yearsley, head of investment at Charles Stanley, says: ‘Savers need to do thorough research before buying.’ 

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