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Below is an explanation I offered in our weekly newspaper feature (for more info on it and how to get it in your local paper: http://www.fool.com/specials/1999/sp991117paper.htm)


Q. What's the difference between "buy-side" and "sell-side" analysts?

A. First, know that much of the trading of stocks occurs between large institutions, such as pension funds and mutual funds. To determine which stocks to buy and which stocks to sell, these institutions rely on the research and opinions of analysts. Analysts who work for brokerages, dispensing recommendations to clients, are sell-side analysts. Buy-side analysts don't sell their research to outsiders. They work for mutual fund companies or other financial institutions and give recommendations internally, almost exclusively to portfolio managers and other money managers.

It might make more sense if you imagine a retail situation, where you're shopping for a new broom at Sweep City (ticker: BRUM). The guy who works there, describing and recommending various brooms to you, would be the sell-side clerk. He's out to drum up business and make sales. Meanwhile, a friend of yours who's giving you advice on why you should or shouldn't buy brooms at these prices would be on the buy-side, aligned with you, the buyer.
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