Long time lurker - first time poster.
First, let me give you a brief description about myself and explain why I created this post.
About me:
I graduated from NYU College of Arts and Science in 2011 with a degree in Economics and a minor in Mathematics.
The job market was terrible so I took the time to travel for half a year and then I hunkered down to look for a job and study for the GMAT. I earned a 700 on the GMAT and shortly after gained employment with an IT Consulting Firm working in their corporate finance division. I’ve been working there since July 2012. I always wanted to break into asset management/research so I decided to try my hand at studying for the CFA Level I. Let me begin by saying that this exam is like nothing you have done before in your entire life (or at least it was for me). The best way to describe studying for this exam is like climbing a very large mountain. The mountain’s slope isn’t too high, but whenever you look up you only see clouds and never the peak.
Unfortunately, I made the rash decision to sign up for the exam at the end of January and didn’t receive my books until the beginning of February so my effective study time was only 4 months. I also bought Schweser notes, which I think is a valuable study aid. I found out that I passed the Level I on July 23rd at 10 AM. It was one of the best days of my life, but it was not much of a surprise as I had put over 450 hours into studying for this exam. I received the highest marks in every topic except for Economics – which was a tad bit ironic for me but also not unexpected as I think the Economics portion of this exam is easily the toughest.
Why did I create this post?
I want you to know exactly what you are getting into, and to hopefully give you an insight into what studying for the exam will be like. You will read many posts indicating this exam isn’t worth it, but I argue that the close to $2,000 you spent on the exam and study materials begs to differ. I will also point out to you that earning the CFA Charter is the gold standard in the industry and that there are only a little over 100,000 CFA Charterholders in the entire world. It’s a rare club. You will also read posts of people studying for the exam in 2 weeks and passing. They are either A) lying or B) lying. Either way I would not recommend that approach.
Ok so now for the nuts and bolts - what to expect:
Here is an overview of each topic and what I thought about them:
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Ethics – This topic is a major win all around. It’s weighted 15% and has absolutely no math in it. It is an exercise in memorization and easy to apply logic. Plus, I have heard rumors that if you are on the cusp of passing but score highly in Ethics that you will pass. Before taking the exam I re-read this portions because I did not want to pass up on these easy points.
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Quantitative Methods – The important thing to distill from this is knowing how to do TVM problems. Take the extra time to master this and you will be just fine. This is also a great time to get to learn how to use your financial calculator. The statistics portion of this topic is rather in-depth, which is impressive considering that I took both Statistics and Econometrics in college. If you are unfamiliar with Statistics or have never taken it before in your life I can imagine this section being very difficult. However they explain it well and are quite thorough.
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Economics – In general Microeconomics is always easier than Macroeconomics. The same applies here. The Macroeconomics chapter on Aggregate Demand and Aggregate Supply is quite difficult while the other chapters in the Macroeconomics section are not. Power through this and then the next difficult thing to master in Economics is the currency exchange rates reading. Yes, this reading is very dense, and no please don’t ask me about currency forward contracts.
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Financial Reporting and Analysis – This is an exercise in a lot of accounting. Since this section is worth 20% of the exam, you will make sure to review and study this hard. Again, the math in this is light, however there are a lot of things to cover in this section. I found the most difficult thing to keep track of was the differences between IFRS and GAAP. Overall, the material is dry, but the topics covered are not difficult to understand. It’s just a lot of information to keep track of (especially all of the financial ratios).
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Corporate Finance – This is a review of TVM and then an understanding of WACC. The topics covered are rather straight forward, but in general you should remember how to calculate WACC as well as the different degrees of leverage.
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Portfolio Management – I was pretty intimidated by this topic because I remember a class I took which I had to pass/fail for Portfolio Management. What I like about this topic is that all of the pieces of the puzzle lead up to a big picture of how to pick an optimal portfolio. Once you understand some key concepts, everything will fit together. Calculating the risk of a portfolio is just an exercise in statistics and most of the math in this section is interpreting different graphs
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Equity – Honestly, I found this entire section to be the most interesting of all the material. The math is just a few equations here and there, but most of this is all qualitative. The one chapter regarding how to execute trades is rather in-depth since it throws so much information at you, but other than that the chapters are light and easy to grasp. It is important to understand the equity valuation chapter as this is the guts of this section.
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Fixed Income – Probably one of the most mathematically in-depth sections of the entire material. Nonetheless, all fixed income is an application of TVM so if you understand TVM you will not have difficulty with fixed income. The chapters are quite dense, but oddly satisfying once you master them. The chapter on spot rates is easily the hardest chapter in this section.
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Derivatives – Four words to put you at ease: No Black-Scholes Model. Once you know this put your worries to rest and enjoy this section. I learned a lot about derivatives and now think of them as being much more approachable than I previously did.
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Alternative Investments – this section is much well-deserved break at the end of a battle.
Here are some misconceptions/pitfalls I had when I began my endeavor:
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The CFA Level I is a mile wide and a foot deep - I’ve heard this before and thought to myself that’s not bad. No, the CFA Level I is a mile wide and 10 feet deep. The exam covers the material well enough for you to drown in it, so do not think it’s in any way similar to the Series 7.
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I will have a social life while studying for this exam - Eventually as the test date comes closer you will realize that you will have to sacrifice almost all of your free time to the exam. I missed out on a number of birthday parties as well as paintballing (which to date I have never done but it sounds awesome!) and dedicated all of my free time to the exam. I used up so many vacation days just for the exam. My weekends were dedicated solely to this exam, and yes it’s a major buzzkill.
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Take detailed notes in a notebook while studying – I know this sounds weird, but just bear with me for a second. This was my first mistake, but then again this could be just me. When I first began studying for the exam I would spend hours reading a chapter because I was constantly writing down notes. Eventually I realized that I was falling behind schedule. How did I change my habits? I highlighted the text. I did the in reading questions in my notebook, and of course I did the end of chapter questions in my notebook, but that was it. My notebook simply became a book filled with problems. About half way through studying I started reviewing past material. I created review packets for each chapter, and these review packets soon became worth their weight in gold. I cannot emphasize how important the end of chapter questions are, and I cannot emphasize how important it is to review past chapters. I also find it much easier to review a chapter after you have studied it since you have the context for the chapter as a whole.
Here are some tips that I have learned while studying for this exam:
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Learn everything from the CFAI material – When I signed up for the Level I I also bought Schweser notes. The Schweser notes were very tempting as they were much lighter books, while the CFAI books were much fatter and heavier. Do not be tempted to learn everything from the Schweser notes and completely disregard the CFAI books. Every single line and word in the Schweser notes is important and it’s easy to forget what they are teaching you. The material in Schweser notes is super condensed and does not allow your brain to actually soak in what you are learning. While the CFAI material is also very dense I noticed that I began to appreciate the long ramblings and repetitions of material throughout the book as it helped reinforce the concepts. Furthermore, the CFAI often would foreshadow future topics so when you learned about them in detail they would not appear too foreign.
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How to use Schweser Notes – Schweser notes is a study aid, and is a damn good one. The quick sheet guide is amazing. Furthermore at the end of every volume there are detailed equations for every topic. I simply ripped all of these out, and stapled them together. I added equations that they did not have and committed them to memory while studying. I found the chapters on Income Taxes and Macroeconomics to be quite difficult so for only these topics I did not learn from the CFAI material but learned them from the Schweser notes.
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Mock Exams – Do not forget that the CFAI provides you with a free mock exam. This mock exam is a great litmus test to help gauge your performance on the actual exam as it has been created by the same institute. When I took the mock exam I scored over 80% on it, yet I found it rather difficult as it seemed to be a perfect exam which went over every topic in just the right amount of depth to mess you up and have you rack your brain for the answer. Personally, I found the actual exam to be easier than the mock exam. Schweser note mock exams are right on the money for difficulty.
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Brace yourselves – Test Date is coming – Studying for the exam was a psychological endurance race. Often times I would day dream about getting caught up on my favorite TV shows, having time to hang out with my friends, playing vide games, what have you. The exam is rough, but remember that it will come to an end and your life will return to normal. The question you have to ask yourself whenever you doubt yourself or become sick looking at the books is: do I have it in me to fail this exam and have to go through this all over again? This is why I over-studied so much, because the last thing I wanted to do is to have to study for this same exam again.
Good luck and god speed!
-WACCit
