# Buy Side vs Sell Side > The buy side invests money; the sell side provides trading, research and capital raising services. Learn the main firms, roles, incentives and career differences. Source: https://learn.tradelabsai.com/industry/buy-side-vs-sell-side/ Track: The Trading Industry · Level: Intermediate · Updated: 2026-10-03 Publisher: TradeLabs AI (https://tradelabsai.com). Education, not financial advice. Cite as: TradeLabs Learn, "Buy Side vs Sell Side", https://learn.tradelabsai.com/industry/buy-side-vs-sell-side/ The financial industry is often divided into two sides. The buy side manages money and makes investment decisions: asset managers, hedge funds, pension funds and insurers. The sell side provides services to them: banks and brokers that execute trades, make markets, publish research and help companies raise capital. The names come from the idea that the buy side buys services and securities, while the sell side sells them. Understanding the split explains who does what, how each side gets paid and why their incentives differ. ## Who is on each side | Buy side | Sell side | |---|---| | Mutual fund and ETF managers | Investment banks | | Hedge funds | Broker dealers | | Pension funds | Market makers and dealers | | Insurance companies | Equity and credit research providers | | Endowments and foundations | Exchanges and trading venues (often grouped separately) | | Sovereign wealth funds | Prime brokers. See [Prime Brokerage](https://learn.tradelabsai.com/industry/prime-brokerage/) | | Family offices | | ## What each side does | Function | Buy side | Sell side | |---|---|---| | Goal | Generate investment returns for clients or owners | Earn fees, commissions and spreads by serving clients | | Research | Internal, used to make decisions | Published to clients, often including ratings and price targets | | Trading | Executes the firm's own investment decisions | Executes client orders, makes markets, provides liquidity | | Capital | Invests client or own capital | Uses balance sheet for market making and underwriting | | Paid by | Management and performance fees | Commissions, spreads, advisory and underwriting fees | ## How they interact **Example: A trade from both sides** A pension fund's portfolio manager decides to buy $100 million of a stock. The buy side trader receives the order and chooses a bank's algorithm to execute it over the day. The bank's electronic trading desk, on the sell side, works the order through exchanges and dark pools and may fill part of it from its own inventory. The bank earns a commission, the pension fund gets the shares, and transaction cost analysis afterwards measures whether the execution was good. See [Execution Algorithms vs Alpha Algorithms](https://learn.tradelabsai.com/algo-trading/execution-algorithms/) and [Best Execution and Execution Quality](https://learn.tradelabsai.com/orders/best-execution/). ## Sell side research Sell side analysts publish research on companies, with ratings such as buy, hold or sell and price targets. Since the EU's MiFID II rules took effect in 2018, research in Europe must be paid for separately from trading commissions, a change known as unbundling, which reduced research coverage of smaller companies. Analysts' incentives have been debated, since their firms may also seek banking business from the companies they cover. See [Guidance and Earnings Revisions](https://learn.tradelabsai.com/fundamentals/guidance-and-earnings-revisions/). ## Incentives and conflicts | Side | Potential conflict | |---|---| | Sell side | Advising both investors and companies; trading against clients as principal | | Buy side | Fees tied to assets can encourage gathering money over performance | Rules on research independence, best execution and fiduciary duty aim to manage these conflicts. See [Trading Regulators: SEC, CFTC, FINRA and NFA](https://learn.tradelabsai.com/industry/trading-regulators/). ## Careers on each side | | Buy side | Sell side | |---|---|---| | Typical roles | Analyst, portfolio manager, buy side trader, quant researcher | Sales, trading, research analyst, structurer, investment banker | | Focus | Long term decisions, performance | Client service, flow, deal execution | | Path | Often hired from the sell side after a few years | Common entry point for graduates | See [Trading Careers Explained](https://learn.tradelabsai.com/industry/trading-careers-explained/) and [Portfolio Manager](https://learn.tradelabsai.com/industry/portfolio-manager/). ## Where newer players fit Electronic market makers and high frequency firms trade their own capital but provide liquidity like the sell side. Crypto exchanges combine exchange, broker and sometimes market maker roles. Retail investors act on the buy side for their own accounts. See [Market Makers and Liquidity Providers](https://learn.tradelabsai.com/market-structure/market-makers/) and [Centralized vs Decentralized Exchanges](https://learn.tradelabsai.com/crypto/cex-vs-dex/). ## Frequently asked questions ### What is the buy side? Firms that invest money, such as asset managers, hedge funds, pension funds and insurers. ### What is the sell side? Banks and brokers that provide services such as trading, market making, research and capital raising to investors and companies. ### Is a hedge fund buy side or sell side? Buy side, because it invests money and makes investment decisions. Next, learn how trading desks are organised in [Trading Desks](https://learn.tradelabsai.com/industry/trading-desks/). ## Continue learning - Next lesson: [Trading Desks](https://learn.tradelabsai.com/industry/trading-desks/) - Previous lesson: [Asset Management](https://learn.tradelabsai.com/industry/asset-management/) - Related: [Asset Management](https://learn.tradelabsai.com/industry/asset-management/): Asset managers invest money for clients through mutual funds, ETFs, pensions and separate accounts. Learn the main types, how they earn fees and how they invest. - Related: [Trading Desks](https://learn.tradelabsai.com/industry/trading-desks/): A trading desk is a team focused on one market or activity. Learn how bank and fund desks are organised by asset class, the roles on a desk and a typical day. - Related: [Execution and Sales Trader](https://learn.tradelabsai.com/industry/execution-and-sales-trader/): Execution traders carry out portfolio decisions at the best cost; sales traders serve clients and route their orders. Learn the work and the skills. - Related: [Trading Careers Explained](https://learn.tradelabsai.com/industry/trading-careers-explained/): A map of trading careers: traders, quants, developers, portfolio managers, risk and operations. Learn what each role does and the skills it needs. - Related: [Market Makers and Liquidity Providers](https://learn.tradelabsai.com/market-structure/market-makers/): Market makers quote prices to buy and sell all day, earning the spread. Learn how they make money, manage risk, why they matter and the myths about them.