AuthorTopic: How to prepare to pass CFA Level1
@2007-05-26 17:19:14
Hi there, I found this and thought that you might be interested. As it is more than 2 years old, I kept only the relevant part of the document


Passing the exam requires considerable effort. The more you do to prepare, the more likely it is you will pass.
This article is based on interviews and discussions with successful candidates. Much of the information provided is surprisingly timeless; that is, successful candidates in 2004 did many things that contributed to the success of candidates in 1983.
In the pages that follow, we will discuss the requirements of the CFA program, describe the four keys to success in the program, and explain the seven factors that most successful candidates share. We hope you will use the information to prepare for and, ultimately, to pass the exam.

The Big Picture: What You Should Know About the CFA Program
Passing the CFA exam requires:
- Commitment .
- Hard work.
- Perseverance.
The more you do to prepare, the better your chance of passing the exam.

Pass Rates for the CFA Exams
2001-2003 2004
Level I 45% 34%
Level II 47% 32%
Level III 69% 64%
(sorry the document has been published in early 2005)

Let's put this in perspective:
1. Given recent CFA Institute pass rates, a reasonable estimate of the implied probability of passing all three levels without failing any of the three exams is around 18-20%.

2. Alternatively, according to CFA Institute, for every 100 candidates who enrolled in the program in 1996, 5 years later only 19 had received their charters.
This is why it is worth it to get the charter - it means a lot.
But don't be intimidated - after all there are over 65,000 active charterholders worldwide.
Hold in mind that the CFA Institute pass rates include only those candidates who actually completed the examinations. Over the last 10 years, the number of enrolled candidates that did not sit for the examinations has averaged 25 percent across the three Levels.
The CFA Curriculum2
CFA Institute ensures that the CFA curriculum is truly global. Additionally, it is grounded in the practice of the investment profession. Thus:
- CFA Institute determines those elements of the body of investment knowledge and skills that are important to charterholders in their practice by periodically (approximately every five years) conducting a job analysis involving CFA charterholders. (CFA Institute is currently conducting a new job analysis.)
- The Candidate Body of Knowledge (CBOKTM) and the emphasis of each of the major topic areas on the CFA examinations is defined by the results of the survey.
- The CBOK is organized into four major topics:
1. Ethical and Professional Standards
2. Investment Tools
3. Asset Valuation
4. Portfolio Management
- The emphasis at Level I is tools and inputs and includes an introduction to asset valuation and portfolio management techniques.
- The emphasis at Level II is asset valuation and includes applications of the tools and inputs in asset valuation.
- The emphasis at Level III is portfolio management and includes strategies for applying the tools, inputs, and asset valuation models in managing equity, debt, and alternative investments for individuals and institutions.

Ethical and professional standards are covered at all three levels of the curriculum.

I removed the details of the curriculum as they have been updated. You can find this info on the CFAI website

I hope that it will help to keep motivated
Best of luck for the upcoming exam

@2007-05-27 13:33:27
The Four Keys to Success in the CFA Program
Charterholders we have interviewed tell us there four keys to success in the program.

1. Understanding the Purpose of the CFA Curriculum
The purpose of the CFA Program is to help candidates learn. CFA Institute has done an excellent job of testing knowledge rather than the ability to simply memorize lists.

2. The CFA program is based on self-study.
The Candidate Curriculum Committee (CCC) and CFA Institute staff choose curriculum materials to reflect the CBOK. The curriculum in turn provides candidates with detailed information on what to study. According to the 2005 Level I CFA Institute Study Guide:
- The CFA candidate curriculum uses two types of learning objectives:
1. Topic-level learning objectives and
2. Reading-specific learning outcome statements (LOS).
- A collection of topic-level learning objectives and reading-specific LOS makes up each study session; the primary purpose of topic level learning objectives and LOS in the CFA curriculum is to enhance candidate learning.
⇒ LOS help you understand how each reading addresses the learning objective for the topic, and for a particular reading the LOS indicate what you should be able to accomplish after studying that reading.
As a Level I candidate, it is critical to understand that you must learn the material that CFA Institute wants you to learn. Let the LOS be your guide when you study.

3. The amount of preparation necessary is significant.
Don't let anybody kid you. You have to put in the time studying and you have to study smart- that is you have to be:
- Efficient in what you do because there is a vast amount to learn.
- And you have to be effective'you have to master the assigned material (you must learn the material not just memorize parts of it!!!).
This means you need a disciplined study program. It will take more than just looking over one study session a week for 18 weeks - a lot more.
A note: At Level I, candidates who have an undergraduate or graduate-level finance degree will have an advantage over candidates who do not.

o The CFA curriculum at Level I has material that is not found in most college courses.
o The standard to pass is higher than for many college courses.
o The time pressure on the exam is intense.
o An all day exam is a physically and mentally challenging event.
o An exam that tests as many different subjects as does the CFA exam is very different from a typical college level exam, even at the graduate level.

4. The material you must learn is cumulative.
For example, consider Portfolio Management:
At Level I you must show a working knowledge of the basics:
- Diversification
- Correlation
- Systematic risk and beta
- Models like the CAPM

At Level II - you are expected to be able to apply what you know:
- More sophisticated models like APT are included
- What was learned at Level I is applied in pricing securities, telling whether a security is under priced, and so forth
- Problems with using the S&P 500 Index as a proxy for the market when using CAPM are explained (e.g., benchmark problems)
- The importance of knowing the investor is introduced as are asset allocation and the CFA Institute model of investment policy - risk tolerance, return objectives, and constraints
At Level III - synthesis and integration are the key along with demonstrating good judgment:
The portfolio management material expands to include:
= In depth analysis of pension plans (defined benefit and defined contribution), insurance companies, foundations and endowments, and individuals
- Global portfolio management
- Sophisticated understanding of alternate asset allocation and rebalancing strategies
- Tying everything together - choose which of several derivatives strategies is best given a specific client and the client's risk tolerance, return objectives, and constraints and justify your choice.

The Seven Factors Necessary to Pass the Level I CFA Exam
What does it take to pass the Level I exam? Here's what the charterholders we have interviewed say:

1. Commit to learning the material - all of it, not just the topics you like. CFA Institute will test you in every topic. Even though the CFA examination is a compensatory examination, if you know nothing at all about a major area, it will be hard to score enough points in another area to pass.

2. Start early- build in some slack to allow for emergencies later.

3. Study with the exam in mind - let the LOS be your guide. Pay close attention to the command words in each (even though a word like "explain" can be hard to apply in a multiple choice question).
As a Level I candidate, your exam will consist of all multiple-choice questions. The objective nature of this type of exam means that, when you study, you should be:
- Learning to recognize true statements of fact.
- Thinking about false statements that could be made.
- Considering what items must be present to make something true or correct.
Multiple-choice questions frequently require calculations and often require that you know definitions.

4. Rehearse - work examples, do calculations, work practice questions.
The time pressure on the exam is intense - many candidates run out of time and leave questions unanswered on the exam. A primary reason is not having worked through problems in the course of preparing.
Another reason is not being familiar with your calculator. Use your calculator often so that you will be proficient when it is time to take the exam.

5. Study every topic - leave nothing out.

6. When you are working on practice problems, practice exams, or sample exams provided by CFA Institute:
- Try to answer each question/solve each problem before looking at the answer.
- This is critical if you are to develop the essential skill of converting what you know into the correct answer.

7. Finally, and most critically, be engaged in your study. Recognize that your objective in studying is to learn the material in a manner that will permit you to respond correctly and quickly to questions based on the LOS. You should not simply read everything three times or put in time just turning pages; your time is too valuable. Rather, you should be seeking to engrave the appropriate response to the LOS on your brain. Write as you study - it will keep you focused on the material - you will learn better.

The bottom line - there is no substitute for preparation.
CFA Institute suggests a minimum of 10-15 hours a week for approximately 5 months. Given the breadth and depth of the curriculum, this understates the time needed for many candidates.
Note also that an important part of your study is reviewing what you have studied. A good rule of thumb is to have completed all the readings at least one month in advance of the examination. The final month should be spent reviewing the material.

Several observations regarding these allocations may be helpful.

1. Asset Valuation (30%) and Financial Statement Analysis including Corporate Finance (28%) are the major emphasis on the Level I examination. Without strong performance on these two topics - and all of their subtopics - it will be difficult to pass.
Asset Valuation will continue to be fairly objective and specific. This is a demanding area, and requires considerable knowledge and effort to be in a position to answer the kinds of questions you are most likely to encounter.

Expect and prepare for questions on:
o Equity investments.
o Debt investments.
o Derivatives investments.
o Alternative investments.
Financial Statement Analysis (including Corporate Finance) will be just as important as Asset Valuation. The questions in this area can be quite difficult, so you must master this material to a reasonable degree. Fortunately, as with all other areas, the Financial Analysts Review offers some of the best instruction possible for Level I Financial Statement Analysis.

2. Ethical and Professional Standards is 15% of the Level I examination. This topic is always an important part of every examination, and one that you should pay attention to and perform well on. Count on it being 15% again- CFA Institute takes ethics very seriously. Learning the Code and Standards will pay dividends at Levels II and III, as the Code and Standards are also the basis for the Level II and III ethical and professional standards questions.

3. Both Economics and Quantitative Analysis will be tested. Allocate your time in accordance with the weights in the preceding table adjusted for your background. For candidates without good backgrounds in these topics, this can be very difficult material.

4. Portfolio Management will be on the examination. By the time you get to Level III, it will be the examination (at least a very large part of it) so anticipate some questions this year. Don't neglect it even though it is only 5%.
Given the above, we have the following suggestions:

1. Write out a study plan.
- Leave 3-4 weeks at the end to review everything, take a practice exam or two, work problems, and review all the LOS.
- Begin by looking over all the material. This is where good study notes can come in handy. Going through everything at the beginning will trigger the learning process and will show you how various topics relate to each other.
- When you start in depth study of each study session, allow time every three weeks or so to go back over what you have studied so you don't forget the material.

2. Have a folder for each study session or topic. As you study, take notes and put them in the appropriate folder. Put examples of problems in the folders. Put everything you think will help you in the folders. When it comes down to the last few weeks- and during your periodic reviews' you will find these folders of great help.

3. Some topics may require proportionately more study time than others relative to the announced weight for the exam depending on your strengths and weaknesses. Allow for this.
4. Make sure you stay on schedule. Otherwise you could find yourself out of time with one or more major topics yet to cover.
5. Consider scheduling the harder topics early in your study program so you can get a good overview and then return to the topic at a later date to refine and review one or more times.
6. Study every topic, leave nothing out.

Hope it'll help

@2007-05-27 20:37:07
Might have helped if this was posted in Feb-March :)
@2007-05-29 12:19:18

Yeah I too wished I had this much earlier :)
@2007-11-21 13:40:38
I just want to put it up as I fell it might be helpfull again

Best of luck
@2007-12-02 10:04:09
Very helpful, albeit late! One suggestion: practice, practice and practice. Even if you overlook certain study topics, with practice questions (and answers!), the topic is less alien. This site provided good practice qestions and some of yesterday's questions were familiar thanks to this site. Does not mean that test was easy!
@2007-12-08 11:26:45
great it is going to help me alot.
@2007-12-09 18:00:59
@2007-12-16 07:39:10
Thanks .. this re-enforces what I was told.. practice and practice and practice. I have enrolled for June 2008 and hope to complete my ethics part in another week.

What study material would you suggest?
I plan to use the Books provided by CFA institute as a primary source, online class to keep myself on track and then various practice exams in the month of May. Any more suggestions ?

Thank you
@2019-05-09 20:10:00
hei good advice, even after so many years...I appreciate will put us in some shape..thanks a lot...

CFA Discussion Topic: How to prepare to pass CFA Level1

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I am using your study notes and I know of at least 5 other friends of mine who used it and passed the exam last Dec. Keep up your great work!