Small high-growth companies are critical to the Scottish economy, yet few of them offer opportunities for amateur investors to venture small sums in return for what might be juicy returns.

Only 26 Scottish companies are listed on the Alternative Investment Market, which is 20 years old next weekend. But it does have a total 1074 listed stocks, with investment opportunity for those with a certain risk appetite.

The volatility of AIM investing is illustrated by the performance of Scottish stocks last year. The biggest, Smart Metering Systems, posted a 30 per cent rise while the second largest, IT cloud specialist Iomart, fell by 38 per cent.

The AIM is less onerous in its company regulation than the main London market, which means it may be more risky for investors. Companies do not need to show three years of trading nor do they need to release at least 25per cent of the shares for a "free float".

To counter the risks, there are tax breaks to encourage people to back smaller companies with growth ambitions, as being good for the economy. AIM shares are now eligible for Isas, and are exempt from stamp duty. Many stocks have inheritance tax exemption if held for two years, and many qualify for funding through the tax-friendly Enterprise Investment Scheme and Venture Capital Trusts.

Jason Hollands at Tilney Bestinvest says: "For investors in these schemes, this brings certain benefits including a 30% income tax credit (providing the investment is held for at least five years in the case of VCTs and three years under an EIS), as well as tax free-returns. In the case of an EIS, there is also the scope for capital gains tax deferral and loss relief."

He goes on: "The risks of AIM should not be dismissed though and are apparent from the fact that while it is estimated that some 3,500 companies have raised money on AIM over the last 20 years, according to the London Stock Exchange, there are only around 1,100 companies on the exchange today. Where did half of the companies who raised money go? While some of these will have been absorbed in successful mergers and acquisitions, or taken private again, AIM has also had plenty of flops."

But Hollands says active fund management does appear to be more successful the further you go down the size spectrum - because smaller companies are less widely researched, and there is more scope for an expert manager to uncover hidden gems. Yet the focus by big financial institutions on the big international stocks, and the growing popularity of passive, index-tracking investment, means "exposure to UK smaller companies is virtually absent from many portfolios" - despite the fact there are so many more of them, representing more opportunity.

Luckily the idea of an AIM tracker fund has never caught on. Tracking the AIM all-share index would have lost you almost 4 per cent last year, made only 18 per cent over five years, and lost 10 per cent over 10 years.

Backing new issues on AIM may be dangerous too. Arria NLG, which uses natural language generation technology developed at Aberdeen University, was floated at 180p in December 2013, dropped to 140p almost immediately, and a fortnight ago it was standing at 4.5p. But this month it has more than trebled.

But you don't have to be picking stocks either, you can pick managers who know what they are doing.

One option is a small companies OEIC fund. Hollands suggests picking a fund that isn't too large, such as the £116m AXA Framlington UK Smaller Companies fund (30% invested in AIM), the £282 million Fidelity UK Smaller Companies fund (21% in AIM) and the £149 million Franklin UK Smaller Companies fund (32% in AIM).

Another is an investment trust in the UK Smaller Companies sector. Trusts are quoted companies with shares that are bought and sold, so unlike OEICs they do not come under pressure to sell investments in tricky times. The Standard Life UK Smaller Companies Investment Trust, managed by Harry Nimmo, holds around 25% in AIM, and is up 456 per cent over 10 years against a 191% rise for UK smaller companies sector.

Nimmo says: "The Alternative Investment Market is undoubtedly a more mature and better balanced market in terms of sector exposure than it was 10 or more years ago, while still retaining its growth and development market character. Careful stock selection can unearth the large companies of the future."

He cites success stories such as ASOS (online clothing retailer), Abcam (online antibody distributor), EMIS (GPs' office software), First Derivatives (financial software) and CVS Group (vet practices) and says: "AIM has undoubtedly been a success story for small company development, our investors, and employment and wealth creation in the UK. In many ways it is unique in its scope and should be fostered."

Diverse Income Trust launched in 2011 has 35.5% of its assets exposed to the AIM market, second only to Artemis Alpha at 40%, and has almost doubled in the past three years. Manager Gervais Williams says; "AIM could well turn out to be the next NASDAQ."