Sell Side vs Buy Side | Top Differences You Must Know!

Difference Between Sell Side and Buy Side

Sell side can be defined as firms that tend to sell, issue or trade-in financial securities and it includes corporations, advisory firms and investment banks whereas buy side can be defined as firms that tend to buy financial securities and it includes pension funds, investment managers, and hedge funds.

If you are in the Investment Banking industry, it is essential to know the difference between Sell and buy side. Yet the irony is that many of us are still unaware of these very important terms. Many a time I have seen that students are not only confused between these two terms but also about its usage in the context of Investment Banking Roles in the industry. Statistics say that the Sell-side makes up one half of the Finance Market and the Buy side makes the other half.

Sell-side includes the entities which facilitate the decision making of the buy-side.
Buy-side includes entities that are involved in making Investment Decisions.

Firms Involved

Sell Side includes firms like Investment Banking, Commercial Banking, Stock Brokers, Market Makers, and other Corporates.
Buy Side includes Asset Managers, Hedge Funds, Institutional Investors, Retail Investors.
Buy side firms can be bigger in terms of the operations but the number of analysts may be lesser. These Analysts often interact with the Sell Side Analysts.
On the other hand, the number of Analysts in the Sell Side Firms is higher as these analysts are dedicated to the analysis of specific sectors or specific companies.

What do they do?

Sell side companies closely keep track of the Stocks, the performance of various companies and also project their future financials based on various analyses & trends. They come up with their research recommendations (target price) in their equity research reports.
Sell side companies (equity research) essentially “sell ideas” to the clients and in most cases, these ideas are communicated for free.
Their work revolves around Financials & Annual reports which includes a detailed analysis of the Quarterly results, Balance sheet or any other published data.
Buy side includes the entities that are involved in deploying their Capital. They may refer to the analysis or price given by the investment Banks for taking their investment decisions.
Buy Side essentially have a pool of funds which is used for investing
So we can say that sell side entities provide services to the buy side entities for taking investment decisions.

Sell Side vs Buy Side Infographics

Goals

The goal of a Sell Side is advised on research and close the deal.
Sell side analysts carry out research and based on the same they convince their investors to trade through their firm’s trading desk.
Whereas, the goal of the Buy side firms is to beat the indices and generate Investment returns for their clients.

Sell Side Analyst

The Analysts of the Sell side provide greater insights into Trends, Analysis, and projections of Financials
They come up with recommendations & Research reports which are used to make investment decisions for their clients.
One major point of difference is: Sell side analysts do their own research and analysis and create their reports. These reports are available in the public domain.
The job of an analyst is to recommend a Buy or a Sell recommendation for a particular security.

Skills Requirements

Excellent Analytical & Quantitative skills
Strong writing and communication skills
Expertise in Excel, Powerpoint & Word.
Ability to quickly evaluate & analyze financial information & companies
Ability to prioritize Task
Ability to work on multiple engagements
Commitment to obtaining Outstanding results
Ability to work for long hours

Buy Side Analyst

A very interesting point of difference you will find here is that the reports which are created by the Buy Side Analysts are not available publicly.
These analysts use the reports created by many Sell Side Analysts and carry out their own analysis further to come at an investment decision.
Here, the job of the Buy Side Analyst is not just to give a Buy or Sell decision but to make an investment decision adhering to the company strategy.

Skills Requirement

Strong & Intellectual eye for investment opportunities
Monitoring the Market developments
Ability to create productive, timely & high-quality reports for investment decisions.
Ability to analyze Risks and Industry characteristics
Ability to constantly monitor Portfolio performance
Keep updated with the economy & global markets
Expertise in excel, word & powerpoint

Compensation

A requirement of higher skill-sets and knowledge for buy side analysts for the investment decisions make them fetch higher pay than the sell-side analysts. But there may be always exceptions.

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Difference Between Sell Side and Buy Side

Firms Involved

What do they do?

Sell Side vs Buy Side Infographics

Goals

Sell Side Analyst

Skills Requirements

Buy Side Analyst

Skills Requirement

Compensation

Buy-Side vs Sell Side Video

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Difference Between Sell Side and Buy Side

Firms Involved

What do they do?

Sell Side vs Buy Side Infographics

Goals

Sell Side Analyst

Skills Requirements

Buy Side Analyst

Skills Requirement

Compensation

Buy-Side vs Sell Side Video

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