The buy side refers to institutional investors, such as pension funds, mutual funds, hedge funds, and insurance companies. A buy side entity typically has a large amount of funds that it seeks to invest on behalf of its clients, with the goals of maximizing return and minimizing the risk of loss for their clients' funds.
The buy side may employ its own analysts to decide which securities to invest in, or it may also rely upon the advice of various sell side analysts. If a buy side firm uses its own in-house analysts, then their research is considered proprietary and is not publicized, which may give individual buy side firms an advantage over their competitors.
Companies trying to obtain funding typically work through the sell side, such as investment bankers, who have contacts on the buy side. The fund managers on the buy side rely upon their counterparts on the sell side to screen the less worthy companies; thus, sell side firms are only expected to bring to the attention of buy side firms those companies in whose securities they are most likely to want to make an investment.
The definition of the buy side is not usually considered to include the individual investor.
The investments of the individual investor may be impacted by the investment activities of buy side firms, whose massive purchases and sales can impact securities prices. For example, a large buy side purchase can trigger a jump in stock prices, while a sell-off can have the reverse effect.