Difference Between Sell Side vs Buy Side
Sell-side can be defined as a segment of the financial service industry that is concerned with creating, promoting and selling of bonds, stocks, foreign exchange (Forex), etc. Sell-side entities or individuals facilitate the buy-side firms in making necessary decisions. On the other hand, buy-side is advising institutions that are involved in purchasing investment services. Buy-side entities purchase financial securities like unit trusts, life insurance companies, mutual funds, private equity funds, pension funds, and hedge funds.
Entities that buy assets and financial securities for their clients or for personal purposes are always considered to be at the buying end. Venture capital (VC), private equity, insurance firms, growth equity, pension funds, mutual funds, institutional investors, hedge funds, and retail investors are common types of buy-side firms. Buy-side comprises firms that take part in the investment making decisions. Sell-Side vs Buy Side in this article, the importance is implemented.
Head to Head Comparison Between Sell Side vs Buy Side (infographics)
Below are the Top 10 Differences Sell Side vs Buy Side:
Key Differences Between Sell Side vs Buy Side
The key differences between sell-side vs buy-side are discussed below:
1. Sell-side has firms such as commercial banking, investment banking, market makers, stockbrokers and other entities, whereas Buy-side includes retail investors, institutional investors, hedge funds and asset managers.
2. Sell-side firms aim at advising on research after analyzing the same, and based upon the results, they try to convince the investors to buy and sell through their trading desk, and accordingly, these firms shut the deal, whereas Buy-side entities aim at beating the indices and generating investment returns for their clients.
3. The skills required for a sell-side Analyst are:
- Excellent verbal and non-verbal communication skills.
- Strong analytical and quantitative skills.
- Multitasking skills.
- Comfortable with the work pattern, i.e. to be able to work for extremely long hours.
- Ability to obtain outstanding results.
- Skills related to prioritizing tasks.
- Quick evaluation skills.
- Ability to analyze companies and their financial information.
- Expertise in MS Excel, MS PowerPoint, and MS Word.
4. On the other hand, the skills required for a buy-side Analyst are:
- Expertise in MS PowerPoint, MS Excel, and MS Word.
- Ability to keep self updated with recent trends in the economy and global markets.
- Ability to regularly monitor the clients’ portfolios.
- Ability to monitor market developments.
5. Sell-side reports created by the analysts are publically available, whereas the buy-side reports are not publically available.
6. The lifestyle of sell-side firms is erratic due to the long working hours, whereas a buy-side firm’s lifestyle is easy and not so erratic.
7. The sell-side analysts are required to buy or sell recommendations, whereas the buy-side Analysts carry out further analysis by taking the use of the reports that the Analysts make of the sell-side.
Sell-Side vs Buy Side Comparison Table
Let’s discuss the top comparison between Sell Side vs Buy Side:
|Basis of comparison||Sell-Side||Buy-Side|
|Definition||Sell-side individuals or firms that are always eyeing for pitching and selling assets and opportunities.||Buy-side entities are entities with capital that are always eyeing to purchase assets and opportunities at a lower cost so that the same can be sold later at a higher cost.|
|Decision making||Sell-side firms or individuals facilitate the buy-side entities in their decision making.||Buy-side comprises firms that take active participation in making decisions pertaining to investment.|
|How does sell-side/ buy-side make money?||Sell-side firms or individuals make money by charging commission or fees against creating, promoting, and sale of stocks, foreign exchange, and bonds.||Buy-side entities make money by buying financial securities at low prices and selling the same at high prices.|
|Examples||Investment banking, research, sales and trading, commercial banking, and other advisory services are examples of sell-side services.||Growth equity, private equity, hedge funds, venture capital, and other retail and institutional investors are examples of buy-side services.|
|Type of structure||The structure in a sell-side is more hierarchal as the employees are designated in a hierarchal order. The Analysts are placed at a lower or sub-ordinate level; Associates are placed right above the Analysts, VP or Vice Presidents are designated above the Associates while the top-most position is secured by the MDs or the Managing Director.||The structure in a buy-side is leaner with only three positions. The Portfolio Manager is posted at the lower or sub-ordinate level, the Researcher at the mid-level and the Marketing Person is placed at the top-most level.|
|Lifestyle||The lifestyle of a sell-side individual or firm is comparatively more erratic as a result of extensive working hours. The reason for long working hours could be the fact that the sell-side firms act as investment banks, and therefore, they are always at the service of clients.||The lifestyle of buy-side entities is not that erratic as compared to sell-side firms.|
|Reports||Sell-side reports are publicly available.||Buy-side reports are not publicly available.|
|Analysts||Analysts in sell-side firms are required to sell or buy recommendations.||The Analysts in buy-side firms make use of the reports that are made by the sell-side Analysts for carrying out further analysis.|
|Number of Analysts||Sell-side firms employ a higher number of Analysts as compared to Buy-side entities.||Buy-side firms employ a decent number of Analysts, which is comparatively fewer than Sell-side entities.|
|Firms/ Investors||Sell-side has firms such as commercial banking, investment banking, market makers, stockbrokers and other entities.||Buy-side includes retail investors, institutional investors, hedge funds, and asset managers.|
Sell-side, also known as prime brokers, can be defined as investment firms that offer corporate entities’ investment services (assets/money management firms). These make money by charging fees or commissions against developing, marketing, and selling bonds, stocks, foreign exchange, etc… In contrast, Buy-side can be defined as that part of the financial industry that buys a huge amount of financial instruments solely for the purpose of holding the same as an investment for themselves or for the clients.
This is a guide to Sell Side vs Buy Side. Here we discuss the Sell Side vs Buy Side key differences with infographics and comparison table. You can also go through our other suggested articles to learn more –