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CFA Level 1 Preparation Tips

CFA exams are known to be one of the most difficult finance related exams in the world. Successful candidates feel as if they have won a marathon! This is because the curriculum spanning across ten subjects is extremely comprehensive. Retaining all the learning outcome statements till the exam and recollecting them while writing the actual “single day “exam becomes overwhelming.

Clearly, if you are embarking on this journey, a structured study plan which is executed with consistency and dedication can aid in sailing through it smoothly. Additionally, during this juncture of time which is hit by global pandemic, two more attributes of patience and calmness will act as the best adhesive.

In this article, we will attempt to share with our readers, few suggestions which can be incorporated to make CFA Level 1 study plan more effective and actionable.

But before delving into them, I truly believe that the efficacy of one’s preparation directly depends on the willingness to achieve a clear goal. In other words, preparatory tips are futile if our zeal or passion to become a CFA charterholder is not strong enough. And if it is, this zeal only will ubiquitously hold us till the very end.  The below quote affirms this view even more lucidly:

“Get super clear on who you want to be and then do everything in your power to become that person. Clear vision. Aligned action. That’s all there is to it.”

So if you have a Clear vision here, let’s talk about the second dimension, Aligned action. Aligned action is nothing but the implementation of the structured study plan we spoke about. 

Here are few things we can keep in mind:

  1. Start early: Whatever be your goal, an exam or a competition, if it has a set date, starting early always help. Early starters have the ability to overcome any unexpected/ temporary obstacles or setbacks. How early will be good enough? I would say, seven months. Six months is a comfortable window to finish the curriculum along with our jobs or education commitments. Last one month should be dedicated towards full syllabus revision and full-length mock exams. 
  1. Carefully compute “your” total study hours: The ideal number is dependent upon your individual education background, work experience, comfort level, etc. We can get a clue from a survey conducted by CFA Institute in which CFA candidates participated. The result of the survey revealed that “on an average”, 300 hours of study time is required to prepare for Level 1 exam. We can deduce three scenarios from the keyword “average” here. You can target (a) more than, (b) equal to or (c) less than 300 hours depending upon where you see yourself. 

But be mindful, all this can set up a trap actually. Since we will be studying the material for the first time, how can we be confident of which category we belong to? I would strongly recommend being conservative and playing it safe. Consequently, plan for much more than the prescribed hours, like, 400-450 hours.

  1. Craft a subject-wise time allocation plan: One way could be to look at topic-wise exam weightages as given by the Institute. Our efforts can directly commensurate with the importance attached to a subject in the exam. Accordingly, topics like Ethics or Financial Reporting and Analysis (FRA) should command more of your time. On the other hand, you may want to touch FRA bit later if you are already comfortable with it.
  1. Create weekly study plans: Mini time-frame, or to be precise, weekly study targets are required to tackle the sheer amount of syllabus at hand. Keeping monthly targets may make us complacent. To cover a 400-hour study plan in 30 weeks, you need to put in around 13 hrs/week. 
  1. Maintain consistency: This is the hardest part. We tend to skip our schedule and think about compensating it later. But gaps will break the rhythm and it is even harder to catch up with the pace we had set before. Let me call a weekly target as a weekly bus. If you miss two weekly buses, you will need to put in 14 hrs/ week. And if you miss four weekly buses, time required will cross 15hrs/week and so on. Having a mentor or study partner will be a big advantage here.
  1. Revise as you go: Our end goal is to recall key terms, formulas, concepts, applications, etc. on exam day. To achieve this, incorporate practice questions and/or sectional tests during the first six months window itself. Don’t wait till the last month to see or attempt sample questions. 

At the risk of sounding repetitive, let me share once again that candidates need to customize their preparation to match individual preferences, current level of knowledge, etc. This is exactly why CFA Institute calls the exam as self-paced to enable customization. But you can still use this article to form a strategy and avoid few mistakes:

  • The mistake of starting late, of thinking that 300 hours will be sufficient, of keeping monthly targets, of not revising and/or practicing sample questions early enough, etc.

How did I go about it?

  • For all the three levels that I cleared in June 2013, 2014 and 2015, every time, I started in the month of November (of the prior year) or right after the conclusion of festivities in India.
  • I followed the sequence of Ethics-> Quantitative Techniques-> Corporate Finance->  FRA->  Equity-> Fixed Income-> Alternative Investments-> Economics-> Portfolio Mgt -> Derivatives.
  • I kept a simple target of studying 1.5 hours daily. If I miss a study slot, I would try to compensate it quickly. In the last two weeks before the exam, I single-mindedly devoted 6-7 hrs every day. So, I ended up giving approximately 400 hours. 
  • Please note that I already had a working knowledge of applying the tools and techniques of equity valuation. That made me comfortable in a couple of subjects like FRA, Equity, Corporate Finance, Portfolio Management, and Alternative Investments. And yet I devoted more than the average hours revealed by the survey.
  • I started attempting sectional tests somewhere in February or 3-4 months before the exam.
  • It was in the final month that I started timing the full-length mock exams to evaluate my accuracy as per the actual time given in the exam

To conclude, if we are ready to put in all the hard work during the preparatory window, there will be nothing to dread about the exam day!  Good Luck!

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