SELL SIDE VS BUY SIDE IN INVESTMENT BANKING

B YM A D H U R I 3 9T H C A OK MU MR E N T S
F I L E D I U NN V DE ES RT : M E N, ET Q UB AI TN YK I RN E GS E A R C H

Sell Side vs Buy Side If you are in the Investment Banking industry, it is essential to know the difference between Sell
side 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 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. So lets see
the major highlights of Sell side vs Buy side. We will cover the following points:

Sell Side vs Buy Side Infographics

What is Sell Side & Buy Side
Firms Involved
What they do?
Goals
Sell Side Analyst
Buy Side Analyst
Skillset Requirements
Compensation

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Sell Side vs Buy Side Infographics

Please go through the below infographics for a quick comparison between the Sell Side and the Buy Side.

Reading time: 90 seconds

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What is a Sell Side & Buy Side?
Sell side includes the entities which facilitates the decision making of the buy side.
Buy side includes entities that are involved in making the 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 Analyst in the Sell Side Firms is higher as these analysts are dedicated to analysis
of specific sectors or specific companies.

What they do?

Sell side companies closely keep track of the Stocks, performance of various companies and also project their future
financials based on various analysis & trends. They come up with their research recommendation (target price) in
their equity research reports.

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 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 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 (Sell Side) 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.

Goals
Goal of a Sell Side is advise 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 firms
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 the Sell Side Analyst is to recommend a Buy or a Sell recommendation for a particular security.

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 buy side 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.

Skillset Requirements:
It is generally seen that higher analytical skills & financial knowledge is required for the Buy Side Analysts than the Sell Side

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 Analyst. The reason for this is that Buy Side Analysts are themselves responsible for taking the investment decisions.

So lets see what are the skills required for the Sell Side and the Buy Side Analysts:

SELL SIDE ANALYST SKILLS REQUIREMENTS

Excellent Analytical & Quantitative skills
Strong writing and communication skills
Expertise in Excel, Power point & 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 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 economy & global markets
Expertise in excel, word & power point

Compensation
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.

Conclusion
Your decision to make your career in Buy side or Sell side will depend on your Goals and where you see yourself. Hope this
article has helped you to distinguish the Sell Side and Buy Side clearly. So, which analyst are you Buy Side analyst or a Sell
side analyst?

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F I L E D I U NN V DE ES RT : M E N, ET Q UB IA TN YK I RN E GS E A R C H

MADHURI THAKUR

COMMENTS
Shivani says
J U L Y 3 , 2 0 1 7 A T 1 1 : 2 6 A M

Great job! Very informative

Reply

Dheeraj Vaidya says

J U L Y 6 , 2 0 1 7 A T 5 : 4 1 P M

thanks Shivani!

Reply

AB says
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 AB says
A P R I L 4 , 2 0 1 7 A T 1 2 : 1 6 A M

Brilliant Article Man! Gives a very clear and precise understanding to the concepts!

Reply

Dheeraj Vaidya says

A P R I L 4 , 2 0 1 7 A T 1 2 : 5 2 P M

thanks AB!

Reply

Vikram Patil says

N O V E M B E R 2 4 , 2 0 1 6 A T 3 : 1 0 P M

Excellent Article which covers the basiscs

Reply

Dheeraj Vaidya says

N O V E M B E R 2 4 , 2 0 1 6 A T 3 : 4 9 P M

thanks Vikram!

Reply

Christie K. says
O C T O B E R 1 7 , 2 0 1 6 A T 4 : 0 1 A M

What a nice visual article of this topic! It was so simple and easy to follow. Thank you for taking the time to share this.

Reply

Dheeraj Vaidya says

O C T O B E R 1 7 , 2 0 1 6 A T 6 : 0 5 P M

thanks Christie!

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 Reply

Vartika says
J U L Y 2 8 , 2 0 1 6 A T 1 0 : 4 2 P M

Such an amazing explanationthanks alot dheeraj

Reply

Dheeraj Vaidya says

A U G U S T 1 1 , 2 0 1 6 A T 4 : 0 8 P M

thanks Vartika. happy to see that you liked this article.

Reply

Marcel Prado says

M A Y 2 5 , 2 0 1 6 A T 1 2 : 0 2 A M

Hi Dheeraj,

Maybe I didnt quite understand the hierarqhy part, but arent Analysts superior to Associates in ER?

Great job by the way

Reply

Dheeraj Vaidya says

M A Y 3 0 , 2 0 1 6 A T 6 : 3 8 P M

Hi Marcel,

In ER, Associates are senior to Junior Analysts. Associates in turn report to the Senior Analyst.

Thanks,
Dheeraj

Reply

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 shrisai says
S E P T E M B E R 1 0 , 2 0 1 5 A T 1 1 : 1 1 A M

SUCH A HARD WORK TO EXPLAIN A DIFFICULT TOPIC IN A EASY WAY OF UNDERSTANDING. YOU CAN BE A GOOD TEACHER.
EXCELLENT WORK, WE APPRECIATE YOUR DEDICATION & INVOLVEMENT IN PREPARING THIS ARTICLE. THANKS DHEERAJ.

Reply

Dheeraj says
S E P T E M B E R 1 0 , 2 0 1 5 A T 1 2 : 2 9 P M

Thanks Shrisai!

Reply

Piyush Jain says

S E P T E M B E R 8 , 2 0 1 5 A T 8 : 5 3 P M

Very crisp indeed

Reply

Dheeraj says
S E P T E M B E R 1 0 , 2 0 1 5 A T 1 2 : 3 3 P M

thanks Piyush!

Reply

Danny says
S E P T E M B E R 8 , 2 0 1 5 A T 8 : 2 6 P M

As what you replied previously a large firm, like JP. Morgan, can be both sell-side and buy-side. Yet, is there any conflict of
interest of being buy-side and sell-side at the same time? What I am concerned about is insider-trading if a firm can be on
the both side. Thanks for your answer!

Reply

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 Dheeraj says
S E P T E M B E R 1 0 , 2 0 1 5 A T 1 2 : 3 2 P M

Hi Danny, I totally agree with you on this. Infact the regulators are also concered with this. That is why IB firms have a
very strict policy where they create Chinese walls sell side and buy side are not allowed to interact. If they are
required to interact with each other, they are moderated by the compliance team.

Reply

orenolu bunmi says

S E P T E M B E R 8 , 2 0 1 5 A T 5 : 0 9 P M

Quite insightful, amazing article

Reply

Dheeraj says
S E P T E M B E R 1 0 , 2 0 1 5 A T 1 2 : 3 5 P M

thanks Orenolu!

Reply

Rashid says
S E P T E M B E R 8 , 2 0 1 5 A T 3 : 0 6 P M

Such nice way of explaining. Thanks Dheeraj !!

Reply

Dheeraj says
S E P T E M B E R 1 0 , 2 0 1 5 A T 1 2 : 3 5 P M

thanks Rashid!

Reply

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 NELSON says
S E P T E M B E R 8 , 2 0 1 5 A T 2 : 4 9 P M

It awesome, it has broadened my knowledge in investment banking and think am best suited in buy side Thanks alot

Reply

Dheeraj says
S E P T E M B E R 1 0 , 2 0 1 5 A T 1 2 : 3 6 P M

thanks Nelson. I am glad you liked the article.

Reply

Deepak Sharma says

S E P T E M B E R 8 , 2 0 1 5 A T 1 2 : 1 2 P M

Nicely written, just a small one, could you check the compensation part in description and infographics.

Reply

Amrita says
S E P T E M B E R 8 , 2 0 1 5 A T 1 1 : 3 6 A M

Awesome Insight and true picture for typica buy and sell analyst

Reply

Dheeraj says
S E P T E M B E R 8 , 2 0 1 5 A T 1 2 : 4 9 P M

thanks Amrita

Reply

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 Rajeena says
S E P T E M B E R 8 , 2 0 1 5 A T 1 0 : 2 3 A M

Hi, Amazing way of explanation..you made it so easy to understand the difference.

Reply

Dheeraj says
S E P T E M B E R 8 , 2 0 1 5 A T 1 2 : 5 0 P M

thanks Rajeena!

Reply

Nidhi Malik says

S E P T E M B E R 8 , 2 0 1 5 A T 1 0 : 1 2 A M

Hi Dheeraj,

Thanks for such a simple and elaborate explanation of both the terms. Please also provide a glance on credit research and
equity research.Thanks a lot..

Reply

Dheeraj says
S E P T E M B E R 8 , 2 0 1 5 A T 1 2 : 5 0 P M

Thank you Nidhi!

Reply

James Hartley says

S E P T E M B E R 4 , 2 0 1 5 A T 2 : 3 6 P M

Dheeraj, one more awesome posts. Hats off to you for your incredible and knowledgeable posts. If anyone follow your
posts, surely he will become a master in Finance Thank you for knowledge sharing

Reply

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 Dheeraj says
N O V E M B E R 2 5 , 2 0 1 5 A T 3 : 3 7 P M

thank you James!

Reply

Florence McShaw says

S E P T E M B E R 1 , 2 0 1 5 A T 1 0 : 0 5 A M

Hi, Thanks for this content, I always enjoy it, the way it is written is excellent. The Infograph helps a lot.

Reply

Dheeraj says
S E P T E M B E R 1 , 2 0 1 5 A T 1 1 : 0 6 A M

Thank yo Florence!

Reply

Prachi Mishra says

A U G U S T 2 7 , 2 0 1 5 A T 1 2 : 5 8 P M

Thanks A lot for such an insightful detail on sell side vs Buy side. I had a small question. Can any firm be both a Sell side
and a Buy side firm?

Reply

Dheeraj says
A U G U S T 2 7 , 2 0 1 5 A T 6 : 5 8 P M

Hi Prachi,

A large investment bank with an asset management division as well as a brokerage arm can be both sell side as well
as buy side. For example large investment banks like JPMorgan etc.

Thanks,
Dheeraj

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 Reply

Neeraj says
A U G U S T 2 2 , 2 0 1 5 A T 4 : 4 5 P M

Amazing article.

Reply

Dheeraj says
A U G U S T 2 4 , 2 0 1 5 A T 2 : 4 1 P M

thanks Neeraj

Reply

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