^ “Bankers Save Lives”
Goldman and the other big boys should run a PR ad campaign to this effect.
Membership is NOT the same as a CFA charterholder. Any person can be a member of CFAI with an application (there are even 2 tiers of membership). you can write this on your resume “member of CFAI” etc
But you are NOT a CFA charterholder, and CANNOT use the letters behidn your name.
massive difference
I see kurtosis’ analysis skills will be in high demand soon. Woe be unto ye whose tails be less than fat.
Fat, my tail is.
Like the rest of my body, it is.
Judge me by my size, do you?
But to comment on the discussion at hand–TRH says his intent was to get people to think twice before they jump into a three or four year commitment that will take ~1,000 hours of study, cause an enormous amount of stress, and possibly long-term damage to a person’s career or family life (because, in my experience, both have suffered because of my relentless focus on the exam). And at the end of all things, it is not the “glorious one-way ticket into a portfolio management job” that everyone thinks that it is.
I wish that I had listened to this kind of advice before I began the charter, because I’m one of those who spent a lot of time and money and stress on the exam.
Plenty of “average Joe” passive investors beat out professional money managers with their simple ETF portfolios…
Exactly right. less than half of “professional money managers” even beat the S&P
““In 2012, 39% of managers beat the S&P 500.”” http://www.ritholtz.com/blog/2013/01/fund-manager-performance-vs-the-sp/
Which means, you can know squat about finance, put your money in a low-fee ETF, and outperform all these “investment professionals with their fancy MBAs and degrees”
i have to say, as you get older, your views on ideal jobs, career prospects, salary expectations and everything else become a bit more “realistic”.
Many people started off thinking “yes, CFA is beneficial, how dare you to say it’s a waste of time! i am going to make good use of it and hell i am the few lucky ones who will break into and make lots of money…”
in a way you kind of need that passion when you start, because if you don’t have that aspiration, who would sign up to write the CFA exams in the first place?
But L3 candidates or charterholders are probably less “ambitious” with the charter, and they are more conservative with their views on the benefits of CFA.
Ya’ll sound like some very serious people.
The opportunity cost of the exams for me was a couple hundred hours of video games and watching TV. I’d say it was a wise investment.
Agreed. I miss day-drinking on the weekends most, especially in the warm spring weather right before the exam. Memorial Day weekend will continue to be a sad day at my house until i pass lvl III.
Well, almost 100% of the S&P ETFs won’t beat he S&P either (they can only beat it when tracking error gets bigger and luckier than it should). But at least the investor don’t have to listen to a bunch of excuses (so I agree)…
Now slightly on topic, the best feature about taking the exams is getting those karate kid-like skills. We barely noticed when we’re studying because we’re focused on dealing with the stupid quadruple negatives and avoiding using CFA as a noun (like painting a fence), but once we learn/re-learn all that stuff we can actually do or understand a lot more (like blocking Mr. Miagi merciful punches).
That’s pretty sweet. It may not be the most effective way of learning, or it may not be the most appropriate content, but it’s way more helpful than watching sitcoms all night.
As for the job market, I don’t know. I’d hire you guys, as long as you’re better than the other hundred thousand. I probably wouldn’t hire the sitcom guy though.
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an S&P ETF won’t beat the S&P index? give this man a job asap!
LOFL
The average joe who invests in a mutual fund significantly underperforms the mutual fund. Average investors lose because they lack the knowledge to accept the conviction of the benefits of taking risks. Fund managers underperform because how they invest is a function of how their clients feel. We had two huge market downturns, it is unfair to cherry pick last year without looking at the historical averages. The S&P ETF is always all in, money managers typically have variable cash balances, and they had a lot in the sidelines 2008-2012, so it makes sense for the S&P etf to outperform. Barry ritholrz btw is an amazing blog, one of the rare good ones.
http://moneyover55.about.com/od/howtoinvest/a/averageinvestor.htm
Haha, yeah it’s probably higher NPV than that. I was in a similar position. Young, stuck in India, and with plenty of time to do this shit. It was a better use of my time then I would have used. But I don’t know how married people or even parents consider doing it when they are in their 30’s.
Look, if you’re already in a part of the industry (traditional buy-side portfolio managment, not private equity, not banking, not many kinds of hedge funds), the CFA is useful. If you’re not, it still can be useful, but for different reasons. You may not see the payoff right away, and you might not even notice it at all, but that doesn’t mean it isn’t there.
CFA was never meant to be a break-in tool. It was designed as a mid-career professionalization program, that - as the industry advanced and got more competitive - started attracting younger and younger candidates.
For a time in the mid 2000s, it actually was useful as a break-in tool, but this is when finance was desperately trying to fill seats. These days, there are enough experienced people looking around for work that having CFA levels under your belt just isn’t as helpful as it once was for making you stand out from the crowd.
If you’re looking to break in, it’s hard to say that not having the CFA is worse than having it. The real issue is whether the work required to obtain the charter is worth the effort it’s going to take, particularly if you aren’t already in a part of the industry that values it.
There is useful knowledge in the CFA curriculum, particularly for those of us that did not do finance as an undergrad. You get a sense of what all those different financial ratios actually mean, you understand that portfolio diversification involves more than just having lots of different tech stocks in your portfolio, and why fixed income is useful in many contexts. You learn that the proper way to evaluate portfolios and investments is in relation to the risk that they represent, and not solely on the return possibility. You also learn that it’s not all that clear that research can uncover a lot of value in investing, and that indexing has a lot of evidence going for it. You learn that options sound great but actually can be kind of expensive if you don’t use them judiciously. Maybe there are ways to outperform the market index on a risk adjusted basis, but the burden of proof is on the portfolio manager to explain how they do it (certainly not Bernie Madoff’s “if you have to ask me, we don’t want your money” bluff), and whatever you do, you don’t want to pay fees for people who just say they’re picking stocks.
None of that is obvious to outsiders (or many insiders for that matter) and so it is valuable. If you are going to manage your own portfolios, that kind of knowledge can prevent a lot of stupid decisions. Yes, in theory, you don’t need to study that much to know these things, but it is unlikely you would take them as seriously if you hadn’t, and over your investing lifetime, that knowledge can provide improvements on return that will likely be at least as valuable as the time “lost” to studying.
I know you’re just messing around, but the point is that ETFs lose to many mutual funds that are compared to the same benchmark. So saying that active management loses to benchmarks on average is meaningless, since nobody can ever invest in a benchmark.
While 30 whatever % managers lose to the index, about 100% of ETFs lose just as well. When they don’t it’s because the index designers screwed up their optimization method and got lucky while doing things wrong. From that point of view, mutual fund managers destroy ETFs. It’s just hard to choose them right.
If you want to always underperform as long as you live, you should invest in ETFs, while carefully looking at their design (non-S&P ETFs vary a lot in their methods and tracking capabilities). And ETFs usually underperform by way more than fees. If you want to be globally diversified, you’ll probably lose a couple hundred bps compounded forever. If you want to be asset diversified, ETFs will screw you.
You may compare active management to ETFs (and you’ll need to run simulations since there’s too little historical information) , but comparing active management to S&P is simply innapropriate - it’s like saying mutual funds underperform pots of gold at the end of a rainbow. You were comparing apples to rainbows.
Depending on the restrictions you have, beating the market may be pretty hard. Beating ETFs is a little easier. Even equally weighted (diversified) naive portfolios have an inherent advantage.
Finance was “desperately trying to fill in seats” in the mid 2000s? Since when has finance EVER been desperate to try to fill in seats for anybody other than IT people? Aside from the freak event of the World Trade Center getting hit and a lot of people being injured / traumatized / dying, finance firms have never been “desperate”. And as a general rule finance - especially the buy side / wealth management - has been rife with nepotism and croynism since forever.
Is this before fees or after fees? There are some disadvantages to investing in the index, such as overweighting the largest stocks in the index, but there are disadvantages to active management as well such as the added fees and the potential for big screw ups.
ABS origination, securitization, and distribution in the mid 2000s. They were desperate to build up capacity to shove more and more of this stuff into pension plans, and anywhere else they could find people who would believe that if you bundle this crap together, it turns into AAA gold with a higher yield.
Ehh I have just finished my interview and unfortunately I probably failed 
Once again there was no questions about my knowledge but instead of this they asked me questions like ‘where do you see yoursef 5 years from now’ etc.
I dont know whether should I register for L2 if nobody actually cares (especially reflecting my poor economic situation) …