CFA exam. really need to study that much?

Don't fool yourself. Many people in the financial industry who were finance, econ and accounting majors do poorly the first time they take level 1 for the same reasons you mentioned. Very few people are financial experts in every field of finance and investing.

I too thought level 1 would be easy. I had to take it twice to pass it. Level 1 is the weed out test. Level 2 was easier in my opinion.

bwahahahahaha.

short answer: the test is not fair. studying like a madman will improve your odds.

long answer:

the cfa exam will be one of the most awful and traumatic processes of your early career. There are plenty of very intelligent people out there who took L1, failed, and said - F this! - this is BS! - and gave up altogether.

i made it thru in 4 years ( when Level 2 was part essay, only given 1x a year - passed 1, failed 2, passed 2, passed 3 ).

the exam itself is purposely written in a demeaning obfuscating fashion, with plenty of defective questions.

the questions themselves are usually 2 or 3 degrees removed from what they are really asking.

none of the material is difficult in of itself - it is the hazing-ritual approach of the exam experience. in my experiences, there was a HUGE disconnect between the assigned study material and the exam questions - especially in scope and focus.

you will never see your actual score. they (aimr ) used to release portions of the exam with explanations 6mos to 1 year after the exam date.

it is a massive cash cow for the cfa institute, formerly aimr. the source of growth has been asia - india & china - where a cfa would be a ticket into the outsourcing industry for finance. The 90s are over - jobs are scarce - and the value in north america / europe has been diluted. BUT if you are expected to have it - you HAVE to try and get it.

if your work is making you take it, and paying for it - better for you to play ball. TELL everyone at work how much you are studying. There is no downside to this. There are many folks ( me included ) who spent all of Jan-May studying this crap and were left behind on FAIL island when the you-suck letters came out in august.

Pass rates can be 50-60% - cfai/aimr decides what the passing will be ( arbitrarily ) - so again - not fair.

good luck - study hard - and PASS ETHICS / GIPS!

I had a degree in math and an MBA, and I studied very hard for several months to pass Level 1 - and not with flying colors, either.

Realize that to maintain the "exclusivity" of the brand in the face of an increasing number of applicants, they are raising the bar every year. Of course the theory behind the material is not at a very high level - none of this requires sophisticated understanding of finance, and it's all stuff you could look up. But it is an extremely knowledge intensive exam. It favors those who have excellent memories, and who can do simple arithmetic quickly and without errors.

I highly recommend using Stella or one of the other courses. And I highly recommend listening to a CD/mp3 of the ethics module in your car every single day. After weeks of listening, their paradigm (which has nothing to do with "being ethical") just clicked for me, and that module was straightforward.

Of course, none of this has much to do with succeeding in the world of finance ... except for the magic letters "CFA" after your name.

Good luck!

It would shock me to hear of someone passing the L1 exam without putting in more than a week of studying. I come from a math / economics background and studied the suggested amount (300-350 hours) and passed; but never did I feel like I over-studied. In fact, had I not put in the 300 hours, I would've failed. The econ / stats was review and was 'easy' but the sheer quantity of volume means that intense preparation is necessary to simply remember everything (formulas, definitions, etc.) I'd recommend you start studying early in the New Year. If you are rocking through the material quickly, just back off a bit to avoid burning out in April / May.

15 hours a week isn't that much. Get up an hour earlier and study, look at your notes for 1/2 hour at lunch and again before bed. If you do that 7 days a week, you're well on your way to being ready for June 4, 2011.

Wondering the OP could update us on his progress??

This forum is pretty active and has trolls almost as good as the ones here!

http://analystforum.com/

Undergrad Econ... probably studied 100-125 hours for Level I. The Econ, Stats, equity, and portfolio management was all pretty straightforward. I went to a liberal arts school and didn't have any undergrad accounting so that took me awhile.

I'm almost a year out of school and waited until the end of February to start studying for level 2 and that was really stupid. Am going to have to cram my ass off the next two months.

Hi guys it's me again. Without going into too much detail, things have been very busy and I haven't begun studying yet (it's a little slow this afternoon so I'm browsing letsrun on my iPhone but for various reasons can't study during downtime at work).

The material isn't necessarily tough, but you do need to study. I wouldn't think you need 3 months unless the material is absolutely new to you.

Your performance on the test will depend in part on how well you are at parsing questions. They do try and trip up those that go too fast.

One other thing to point out is that since you have professional experience, you will be tempted to just fall back on what you know and common sense. Beware of that, because what matters on the test is how well you understand how things work in CFA-land, not the real world. I remember this particularly in derivatives - some of the language like "buy a straddle," "sell the call spread" are backwards compared to how those terms are used on a trading desk. I took the exam 7 years ago, so maybe some of that has been fixed.

Last, the whole CFA program is more directed towards people who are retail money managers, so there is a lot of client-handling stuff you need to beware of.

One other thing - kiss your Memorial Day weekends goodbye for a while. Level 1 is not too hard. Level 2 is the hardest, and Level 3 is pretty easy.

Piso Mojado wrote:Level 3 is pretty easy.

I enjoyed studying for L3 the most, but I wouldn't say that the exam is easier than L2. Looking at historical pass rates, L3 used to be "easy" compared to 2, but that is no longer the case.

All in all, I think the program and benefits of being a member of your local CFA society(which doesn't require becoming a charterholder, by the way) are a worthwhile.

The only thing that sucks is that while the CFA designation is well respected in the investment industry, if I ever change careers, it won't be worth squat. Oh well, I like investments, so I am okay for now.

When I took Level 1, I think the pass rate was around 42%, but that was several years ago. Two hours per day and then a lot of practice test taking in the lead-up to the exam should get the job done. I will say this... if you don't pass Level 1 with flying colors in almost every category, your chances of success on Level 2 are virtually nil. At least that's a reflection of how it used to be.

Sagarin wrote:

When I took Level 1, I think the pass rate was around 42%, but that was several years ago. Two hours per day and then a lot of practice test taking in the lead-up to the exam should get the job done. I will say this... if you don't pass Level 1 with flying colors in almost every category, your chances of success on Level 2 are virtually nil. At least that's a reflection of how it used to be.

You have it right. The quant questions on L2 are quite difficult. L3 now has an essay component as well so it brings in the element of subjectivity.

Don't review the subjects and just go straight to the practice questions. What percentage can you answer correctly?

practice qs wrote:

Don't review the subjects and just go straight to the practice questions. What percentage can you answer correctly?

I think I'll try that this weekend. I bought the Schweser books from amazon and maybe I'll try a test cold this weekend. I heard the accounting terms are different from what I'm used to (a/r, a/p vs. debtors, creditors etc.) but hopefully that isn't too bothersome.

from what i remember, you want to be hitting 80s on the practice tests.

Piso Mojado wrote:

from what i remember, you want to be hitting 80s on the practice tests.

Practice exams are the way to pass. And be aware that they will post answer choices that "look" correct i.e. if you annualize a cash-and-carry arb for Eurodollars w/ Actual/Actual vs 30/360, you will get a different (but similar) yield.

I normally had no time to go over my work, but I passed in '98 and had to write essays on all 3 levels. I failed LI my first try, then realized "this is not a joke".

If your job REQUIRES you to pass the level 1 exam, then I would say that should be enough motivation to study hard and fully prepare. What are the consequences to your career if you do not pass level 1 the first try?

I fortunately completed all three levels on the first attempt. I also studied less than anyone else I have ever met for the first two exams. For Level 1, I spent one day reading through the ethics and working through practice problems. For Level 2, I only studied about 30 minutes the day before, before realizing that it was fruitless to try and cram. However, for Level 3, I was not willing to take any chances, and I put in about 200-225 hours of total study time in the 3 weeks before the exam.

How could I pass without "studying?" As an undergraduate, I studied finance/econ/accounting/math. As an MBA candidate, I focused on finance/investments. I also earned my Ph.D. in finance, and at the time of the exams, I was teaching courses in corporate finance, investments, and asset valuation. So in essence, my career and educational path was preparing me for the exam.

Unlike what others have stated, the pass rate is not randomly decided. A committee of charterholders/professionals decide the minimum criteria for what should constitute a pass for each exam. The committee goes through each question. There is no rule as to a minimum pass score, but generally speaking around 70% seems to be the threshold. When 100,000 candidates take an exam, there will always be a large clustering on the borderline. It is always rumored that some question topics are weighted more heavily, such as ethics.

One of the most interesting aspects of the CFA Institute is their financial statements. At the end of 2010, the Institute was sitting on $35.7 million of cash and $198.2 million of long-term investments. Thus, this "non-profit" organization has $233.9 million of liquid assets just sitting around. Why? This amount has only grown larger and larger over time. Employee salaries and benefits topped $53 million last year. This is a very rich organization that pays its executives and officers huge salaries, while charging candidates outrageous exam fees. When you sign up for the exam, you become a cash flow annuity to the organization in the form of registration fees, and if you pass all three levels, future membership dues. I once estimated the PV of this annuity at approximately $5,000-7,000 per candidate.

If you have to ask, the answer is yes. The hard choices are usually the right choices; so, do yourself a favor and study for your exam.

I would also add that targeting a certain number of hours studying (say 200 hours) is the incorrect approach....you should strive to have mastery over the material, regardless of how many hours it takes. This is especially true if you are like me and your purpose is/was to learn and understand rather than just passing the exam. Additionally, I would comment that the CFA books (the six or seven volume set you get with registration) do not have enough questions--only a handful at the end of each section. Take a look at AnalystNotes.com which is excellent and has tons of questions w/ explanations.