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Taking the CFA Level I Exam, June 2012

I’ve been interested in beginning the CFA (Chartered Financial Analyst) program for some time, and last month I finally signed up for the June 2nd test day. The cost of registering for the exam was $1215, which  included a required set of six books published by the CFA Institute. Additionally, I bought a financial calculator for $50 and will have to pay $40 apiece for two sample exams. I figure that’s enough of an expense already, so I’m opting out of purchasing any additional test-prep materials and instead studying on my own.

It’s interesting to be back in the position of studying for a standardized test. For the Level I exam, the CFA Institute recommends a total of 300 (!) hours of study time over the course of six months. That’s considerably more than a typical GMAT course of study, which runs around 100 hours. Once I received the CFA books, it made sense why they recommend so much prep time: there is a lot of material. There’s a total of six books and they’re 500-700 pages each.

I began studying in early February, so I’m actually aiming to pass the exam with an overall prep time of only four months. However, I figure I have a couple advantages. First of all, I already have an MBA, so I’ve learned some of the CFA material already at the graduate level. Secondly, a big part of the exam (20 to 50 percent) is related to financial statement analysis, and I have a decent understanding of this topic already. So I hope that I’ll be able get through the material on time.

That being said, there’s no doubt this is a very difficult exam, and there’s obviously no guarantee I will pass. Unlike the GMAT, the CFA exam is not scored – rather, it’s Pass/ No Pass. The pass rate as of June 2011 was only 38%.

Study Strategy For The CFA Level I

My general study strategy for Level I is as follows. For each chapter in the books, I begin by reading the “Learning Outcome Statement” in the beginning, which tells you what the testmakers expect you to know after reading the chapter. I then read the chapter one time and take very detailed notes. I try to make my notes detailed enough so I can re-learn the material by reviewing my notes instead of re-reading the books. I figure that I’m forced to follow this strategy because there’s simply too much material to keep re-reading the books. If I had to review the books themselves, I would never get through all the material.

The potential flaw in this strategy is that I am ‘flying in the dark’ – I don’t really know what is likely to appear on the exam and what is not. I have to use my judgment as to what to take notes on, and what to skip – it’s sort of like doing Reading Comprehension passages on the GMAT. 🙂 However, each chapter in the CFA books does have the “Learning Outcome Statement” which provides guidance on what the testmakers consider important. The CFA Institute also published a general breakdown of the topic weighting on the exam.

Otherwise, I am trying to maximize the value of the official practice questions. Most of the chapters in the books have 20-40 review questions at the end, and I’m trying to treat these questions like the real exam. I’m only doing these problem sets when I feel like I understand the material and can fully focus on them. When I’m reviewing my results, I am keeping an error log and noting both the questions I missed, and the questions on which I guessed correctly. I’m also timing myself to get a general sense of how long the questions take.

Apart from the end-of-chapter problem sets, the CFA Institute provides two 2-hour “Sample Exams”, which unfortunately cost another $40 apiece. I am waiting on these until I get through all the material. There’s also a single full-length “Mock Exam” which is six hours long, just like the actual exam. I will probably take that in early May, a month before test day.

Realistic Study Planning

One thing I’ve found to be very helpful in my studying is to plan around my own lack of discipline. I have a full-time job, and I’ve discovered that I rarely have the energy or discipline to study after work. Instead, the best time for me to study (on weekdays) is in the morning, before I start work. On weekends, I try to put in a solid 2 hours in the morning, and then more time when I am free later in the day. Overall, this adds up to about 10 hours per week. Realistically, I think this about all I can handle while working my full-time job and tutoring the GMAT.

As of this writing, I’m midway through the second CFA book, Economics. I find this book to be completely uninteresting and Economics is supposedly just 10% of the exam, so I’m just trying to plow through it as fast as I can. I’m actually looking forward to the Financial Reporting and Valuation books that are coming up.

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