Exam strategy - 5

Hello everyone, it has been a LONG week, my apologies for leaving the site alone and leaving you guys alone this past week. I did visit a few time a day to check if there’s any comments or questions.

Last week/weekend was stressful while I was preparing for one of the best opportunities I ever came across during my career in the investments industry. It is still going on this coming week, so a lot of stuff yet to be done. Work has been intense like always, no complaint though. The last 2 days was quiet, and briefly met with a few friends since CFA has come to an end. I am feeling guilty though not updating the site for a week, so here’s a new post.

Today, I’d like to discuss about prep strategy closer to the exam and topics you must cover by next month. Past this weekend, you will have exactly 2 months to prepare for the exam, that is just over 60 days. 60 days alone can be more than enough for some people to pass this exam. On average though, especially for those who also have full time employment, this is crunching time. Many candidates have asked me how they can best utilize their time closer to the exam. And my general recommendation to everyone is the same, that is you should complete all readings by the end of October 31, and focus the entire month of November to practice. This is the key to passing any level of CFA exams.

Ideally you would have completed all reading, but here’s a list of essential topics I think you must have covered by the end of October.

For level 1 candidate, you should have completed

• Financial Reporting and Analysis (study session 7, 8, 9, 10 – reading 22 to 35): understanding balance sheet, income statement and cash flow statement will be essential for level 1, and you will need it for l2 and 3.  You must fully understand the financial statements, and the applications, which is covered in SS 8 and 10.

• Equity and Fixed income: (SS 13, 14, 15, 16): Market efficiency has been a topic throughout of the CFA curriculum, you will need to understand the different types of markets, this is where quant also comes in where you might be given a type I or type II question. In Equity, you also need to understand and be able to apply valuation tools. In Fixed income, you need to cover the basics first, also understand the risks from an investor point of view. I’ve touch upon the concepts of yield/interest rates and bond prices before, which are all important topics from this reading.

• Economics: (SS 4, 5, 6) I personally find this reading tricky in that only 10% of the marks will come from this section, but CFA institute takes 3 study sessions. The only way I can rationalize and be able to explain is economics is fundamental and so deeply tied into our daily lives, but it’s not the most core function of an financial analyst, so you just need to know it. fortunately l1 economics is no more than a 1^st year econ course, as long as you’ve covered micro and macro in school, you should be equipped to pass it with some preparation and practice.

• Quant: (SS2, 3) CFA quant is all about stats. If you’ve done any type of stats course I wouldn’t imagine it will be difficult to study this session. The good thing is they will not ask you to do any type of regression analysis, or ask you to create a simulation model in any level, so you only need to know the techniques, and be able to apply the techniques in a question. I urge you guys to read the command words again and make sure what they are asking here.

The above is what you must have covered come October, I didn’t mention some sections, such as, ethics, derivatives, alternatives and portfolio management. Ethics is going to be a big deal, like I already mentioned. I wouldn’t write a separately post if ethics was not important, but the studying of it is not as rigid as the other sections, reading the standards and code of conduct on the train to work everyday or going home might help you get most of it, and you will need to do questions.  As to derivatives and the other sections, my recommendation is you can study as much as you can but they only weight less than 10% altogether, if you have the time to study, that’s great. If time is pressing and you only have 2 weeks to study, these are the sections you should not spend too much time on. In my case, I tried to cover EVERYTHING, and when I spend hours and hours 1 week before the exam just to understand some derivative pricing calculation, I had to tell myself to stop doing that, as a result I lost valuable time to solidify areas like FRA, and that’s a mistake.

I’ve been rambling on and on, my key takeaway here is put in as many hours as you can until October 31 to complete all readings, and drop the books in November, start doing questions. You need to start using your notes/flash cards, and practice LOTS of questions, be smart when you review, go back to your notes and make sure you understand why your answer was wrong (or right).  I am sorry I didn’t get to l2 today, I will post something tomorrow on l2. Have a productive evening.