College Advice Blog

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Jun 21, 2012

Your Guide to CFA Exam Prep

For investment professionals, there isn’t a more recognized, or more prestigious, designation than that of Chartered Financial Analyst, or CFA. About 90,000 professionals around the world hold this designation, which shows that you have a great deal of competence, integrity and dedication to the profession.

Earning the CFA is not for the faint of heart, though. In order to qualify, you first must earn a bachelor’s degree, or at least be in your final year of a bachelor’s program, or have a minimum of four years of work experience.

Once you meet the qualifications, you need to successfully pass three rigorous exams that test not only your knowledge of investment and finance, but also your understanding of professional standards and ethics.


The Level I test, which you must pass before going on to the next levels, is a six hour, timed exercise that includes 240 multiple choice questions split over ten subject areas. It’s only offered twice a year, in June and September – and requires months to prepare for.

How to Prepare

So you’ve decided to take the leap and seek your CFA designation. The first thing to do is sign up for the required CFA program, offered by the CFA Institute. This is a graduate-level, self-study course that provides the prerequisite knowledge for taking the exam. Once you complete the first section of study, and meet the work requirements, you can register for the Level I exam.

Preparing for the first exam takes, on average, around five months. The CFA Institute provides a study guide with 18 self-study modules; they recommend planning to spend about 15-20 hours per week studying for the exam for at least 18 weeks before your scheduled exam date. After completing all of the CFA Exam Prep work and study modules, take several mock and sample exams to get comfortable with the format and identify and potential issues.

 

What to Expect

The entire CFA exam is multiple choice questions. The questions focus on ten subject areas:
  • Ethics and Professional Standards
  • Quantitative Methods
  • Economics
  • Financial Reporting and Analysis
  • Corporate Finance
  • Portfolio Management
  • Equity Investments
  • Fixed Income
  • Derivatives
  • Alternative Investments
Each subject area is weighted differently in the scoring; the area of greatest value is that dealing with investment tools. However, the section on ethics and professional standards is also weighted very heavily. In fact, your performance on those sections can determine whether you pass or fail. A borderline score in other areas can be offset by a strong performance in the ethics section, so spent plenty of time studying in that area. Most of the ethics and standards questions are scenario-based, requiring you to think logically.

One section that tends to cause the greatest amount of apprehension in test takers is the quantitative section, which heavily emphasizes statistical analysis. The analytical tools you use in this section, though, are vital for the sections on fixed incomes, equities and portfolio management.

The largest section of the exam is the financial analysis and reporting section, which makes up about 20 percent of the test. Questions in this section ask you to interpret financial statements, and also deal with ratios and advanced concepts such as inventory analysis and taxes. This section deals with global accounting standards, including U.S. GAAP and IFRS.

 

Hints and Tips

Because the CFA exam is so challenging, it’s best to not register until you have an adequate level of experience and knowledge to successfully complete the program. Registration for the exam opens about 11 months before the test dates (always on Saturdays) meaning that you have nearly a year to prepare.

Consider hooking up with a study partner to go over material together, and if any sections are unclear or you feel unprepared, take steps to fill in your knowledge gaps.

 

What Comes Next

After you take – and pass – the Level 1 CFA exam, you are eligible to continue the CFA self-study program and prepare for the Level 2 exam. You cannot use the CFA designation until you pass all three exams. Once you do, however, expect to reap the benefits of your hard work, including access to a worldwide network of investment professionals, increased marketability, and increased earning power. You’re hard work and diligence will provide rewards long beyond the hours you spend studying.

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About the Author
This guest post article was written and provided by Marissa Krauss. Marissa finished her Bachelor’s degree in information technology management online this last fall. She is continuing her education by pursuing her Master’s degree online.
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