The Nairobi Securities Exchange (NSE) is Kenya’s national stock exchange. A stock exchange is a form of a market which provides services for investors to trade in stocks, bonds, unit trusts and other securities.

A stock is a type of security that signifies ownership in a corporation and represents a claim on part of the corporation's assets and earnings.

A bond is a debt instrument whereby an investor loans money to an entity (either a corporation or the government) that borrows the funds for a defined period of time at a fixed interest rate to finance a variety of projects and activities. A Treasury bond is a bond issued by a government while a Corporate bond is a bond issued by a company or corporation.

The NSE therefore provides an avenue for investors to buy and sell stocks- to exchange their ownership in one company for ownership in another company and lend to the government and corporations.

Why is it important for investors to be able to trade stocks or bonds? Why are these securities important to the economy?

To ensure and sustain economic growth, money and capital needs to be mobile such that it can flow from less productive to more productive ones. Idle money and savings should be invested in productive activity for the economy to grow.

The Nairobi Stock Exchange makes this possible by:

• Bringing the borrowers and lenders of money together at a low cost. The lenders are the savers and they become the investors. They invest in companies listed on the NSE and expect a profit for the inconvenience of being parted from their money. The borrowers also known as issuers in the markets borrow and promise to pay the lenders a profit, these are the listed companies or the government.
• The NSE, through shares and bonds, gives the government, small and big companies, cooperatives societies and other organizations the opportunity to raise money to expand their business activities, make a profit, create employment and generally aid economic growth.
• Educating the public and potential investors on how to buy and sell; when and why to buy and sell.
• Facilitating good management of companies by asking them to give periodic reports of their performance.
• The NSE provides a daily market reports and price list enabling investors to know the worth of their assets at the close of business every day.

Once we understand why it is important for shares and bonds to exist and to be traded, we must now understand the benefits of investing in shares and bonds. When an individual invests in securities the following benefits accrue to them:

• Stocks, bonds and other securities are a regular source of income. For shares the (annual) dividends paid out by a company to shareholders is a source of income while for bonds the coupon payments are a source of income.
• Shares and Bonds can be used as security or collateral by the shareholder or bond holder to obtain loans from commercial banks and other financial institutions.
• Shares can be a source of profit for the shareholders. Buying and holding onto shares when they have a low value and selling them when their value increases gives an investor a handsome profit opportunity.

Considering all this an individual should be well placed to make an informed decision on whether they are willing to invest in the NSE or not.