CFA Level 1

I took the CFA level 1 exam today. It was an interesting experience, and the first exam I'd taken in ten years.

At one time or another, I'd taught approximately half of the material on the exam (Study Sessions 2, 3, 11, 12, 13,14, and 18). But unfortunately, I put off studying for the remaining parts until about 1 week and a half ago). And there is a LOT of material in the Accounting and Econ sections, much of which is pretty involved. Luckily, people from my "tribe" (Ph.D-holding , alpha-nerd types) are typically pretty good at processing and retaining large amounts of material, and quickly.

I think I did fairly well - of the 120 questions in each session, there were probably 10 for which I had no clue and another 10-15 for which I was able to eliminate two of the four answers. For what it's worth, I finished the morning session a half hour early, and the afternoon session about an hour early. And this includes checking answers (I've always worked fast on tests).

Now I just have to wait until January/February to get results.

Ironically, now that I'm back at the Unknown Household, the next thing on my plate is to write about a half-dozen recommendation letters for students who've applied for Unknown University's CFA Scholarships (I also sit on the committee that makes the decisions, BTW). We give out five, and the local CFA chapter also has a few to hand out. It's a great deal for the students - it cuts the effective cost for the first exam from almost a grand to about $200, and also allows them to get study guides from one of the major test-prep vendors for $100 versus the usual $500 cost.

Since it's fresh in my mind, here are a few study tips to those studying for the exam in June. Realize that the suggestions are free (and probably either fairly priced or even a bit overvalued):

1. Start early - the material isn't that difficult, but there is a lot of it. A LOT.
   
2. As much as is feasible, spend at least a little time studying every day. If you have a study guide (i.e. Schweser's or Stalla's), keep one of the books with you at all times and try to squeeze in a half hour here and there - these little sessions help. If you're diligent, you can probably get in 5 or so hours a week just by filling in the down time that comes with many people's days (i.e. lunch, commuting on the train, etc).
   
3. Work as many of the problems as you can well in advance of the exam (See #1). Much of the material is algorithmic, and you only learn algorithmic material by working through problems.
   
4. When you work a problem, first try it "cold" (after reading the relevent material, of course). If you don't have a clue, review the material and then try it.
5. Don't cheat by looking at the solutions until you've worked the problem - you learn more by finding out WHY your answer was wrong than by seeing the correct answer first.
6. As a final thought on working problems, don't try to study by memorizing practice problems. By all means work them, but mostly as diagnostics. Get the material down first, then work as many problems as possible, but memorizing solutions isn't going to cut it.
   
7. Get a study guide - both Schweser and Stalla have good ones (IMHO, Schweser's is better).
   
8. Plan your studying so that you finish all your preparation with a couple of weeks left before the exam.
   
9. Realize that even if you plan to be ahead of the schedule (see #8), stuff happens. So try to arrange things so that you have the last week or two before the exam largely free for final cramming. No matter how much time you put in ahead of time, you'll need the last week or two for final preparations.
   
10. Schweser has a great book called Secret Sauce that has a lot of helpful tips for that final polishing).
    

Hopefully, I'll pass this level and use these suggestions for the Level 2 exam in June.

Of course, when results are in, you'll be among the first to know.

A Collection Of Study Tips For The CFA Level 2 Exam

We're now well into the countdown for the CFA Level 2 exam in June. In fact, I'm about to teach a few sections of the CFA prep class I teach in a nearby city. So, the exam (and the preparations for it) have been on my mind, and I thought I'd start putting down some tips on how to approach the beast.

• First off, don't take it lightly. Although a good number of people pass Level 1 with only a month or two of studying, realize that the Level 2 exam is much more difficult. While pass rates are similar for Levels 1 and 2, the pass rates for Level two are based on a much more select pool- all people sitting for the Level 2 exam are in the group who've already taken and passed the Level 1 exam. So, treat it with a lot more respect than Level 1. The best description of the difference is that the L1 exam is "a mile and a foot deep" while the L2 exam is "a mile wide and a mile deep". A smart undergrad from a good program will probably recognize most of the material on the Level 1 exam. In contrast, the Level 2 exam had a fair bit of material that I'd never seen before (and not just on the Financial Reporting and Analysis section).
• Second, the Level 2 exam is based on "item sets" - a short (1-2 page vignette followed by 6 multiple choice questions). So, there's much more information provided in the vignette than needed for any individual question. This has several implications: first, that one item set represents 5% of the total exam, so if you miss one vignette, it's a lot of points, and second, that you have to learn how to efficiently pull out the necessary information from the vignette.
• Most people find that they're less time-constrained on the L2 exam than on the L1 exam. But it's still important that you learn how to process information in the vignettes efficiently. One strategy that works is to quickly read the questions before you read the vignette. Then read the vignette while focusing on the first question. This will help you stay aware of the material for the other questions. Underline relevant points in the vignette and make notes in the margin. And most of all, answer a LOT of end of chapter questions.
  

Having said that, here are a handful of suggestions I've heard over the years:

1. What ever amount of time you spent on the L1 exam, plan on spending 20-50% more for Level 2. It's even more more important to start earlier, since "stuff happens" - given the amount of material is too large to cram for. So set up a schedule, and stick to it as much as possible.
2. As you go through the material, strive for consistency in your studies. Even if you started just now, you could make the recommended 250 hours of study on about 2 1/2 hours a day on average. Don't plan on missing days and making up for it later. Instead, study every day. Set a goal of a MINIMUM of 30 minutes to an hour EVERY DAY. Once you put in the minimum, in most cases you'll do more. But make it a goal to avoid "zeros". And track your study time.
   
3. Try to steal little bits of time to study throughout the day - a half-hour here and there can really add up.
4. In Level 1, you can afford to "triage" material (focus more on some sections, and spent relatively less time on the smaller ones - not gonna happen for Level 2. Because of the item set format, missing a topic can result in you missing 6 questions (5% of the exam). So, plan on covering everything with time to spare. CFA institute has a tradition of making one vignette on something that seems like it's not that big a thing in the curriculum - in 2008 it was Balance of payments (I kid you not), and in 2007 it was the Treynor-Black model. So try to be at least minimally familiar with everything.
   
5. Get a good study package (a set of study notes with test software). While the study notes alone might be sufficient to get you through L1, they should be used as supplements for L2. So, read them for a summary, then test yourself, and use the CFA curriculum material to patch up your weak spots, then test yourself again.
6. Use the test bank to take a quiz every week, and go back to prior material every couple of weeks. If you don't periodically review, you'll forget most of your earlier material.
7. Ideally, plan on finishing your first pass through the material with 2 months to spare. Then do a review with tests, and spend the final month patching up your weak areas. That's ideal. But at a bare minimum, schedule your studies so that you finish all the readings with a month left over for review and testing.
   
8. Use the final month for mock exams and for polishing up. If you have a study pack from Schweser or Stalla, they have some mock exams included. BSAS (the Boston CFA society) also has a mock exam that's pretty good. Then take at least one CFA mock exam (and two if you can stomach them). They're not cheap ($50 each), but they'll give you a good idea as to the type and level of questions to expect on the real exam.
9. If you're weak in the accounting/Financial Reporting and Analysis area, consider taking John Harris' 2-day review course. He's one of the best instructors I've ever seen, and paying the $500 for his seminar might well make the difference between passing and failing (after Equity Investments, FRA is the second most heavily weighted section on the exam, and could comprise up to 25% of the total points). I've talked with a couple dozen people who've taken his class, and ALL of them raved about it. I actually took it myself, since accounting is not my strong suit, and after 16 hours of accounting, the room actually gave him a standing ovation.
   
10. In the final month, buy Schweser's Secret Sauce. It's a great summary of the material on the exam, it's small enough to carry around with you, and it does a great job of hitting the high points.

In summary, start early, plow through everything as early as you can, and test, test, test. And if you can afford it, buy a study package from Schweser or Stalla.

If you have other tips, put them in the comments, and I'll add them in.

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