There's absolutely nothing wrong with skipping swaps or derivatives altogether. Unless, of course, you want to pass the level II exam. If I were in your shoes, I would rather approve it, so I would make sure I understand all the derivative material. It could be 15% of the exam. Therefore, I decided to write this blog post to answer these questions and more for any student who is thinking about writing the Level 1 CFA or who has decided that they will write it and want some advice.
The Chartered Financial Analyst (CFA) qualification is a designation granted by the CFA Institute, often referred to as the “gold standard” in professional financial designations. It covers a variety of topics related to investment management. To become a CFA certificate holder, you must pass a series of three exams. CFA Level 1 is the first of three.
As a quick introduction, the Certified Financial Analyst (CFA) exams are a series of three exams issued by the CFA Institute. Upon completion of all three, successful candidates become CFA certificate holders and obtain the CFA designation. Who doesn't like having more letters to put at the end of their name? The CFA covers a wide range of topics related to investment management, ranging from portfolio management to professional ethics. It is often referred to as the “gold standard” in professional portfolio management certifications.
I have never understood why we continued to use that term when we left Bretton Woods (about 50 years ago). The Level 1 exam is the first of three exams. As long as you're at least two years away from graduating when you take the exam, you're ready to start. Technically, there are several different ways to qualify (search Google for more information), but students can take the exam when there are two years left to finish their degree (previously it was when there was one year left, this only changed recently).
This means that if you are starting the second year of a four-year program, you can take the exam at the end of the second year of classes (in May). That is, if you want to write it, you should think about starting studying as soon as this fall. Plus, you can write level 2 as soon as you graduate, so completing level 1 while you're in school speeds up time. So, if you're ambitious and have more free space, the Level 1 CFA is a great option. However, if your plate is already really full, you'll have to consider things more carefully: something would have to be sacrificed to make room for the exam.
While having completed Level 1 of the CFA is a sign to employers of your knowledge and passion for the world of finance, it will not guarantee you anything. In my conversations with people in various roles, in most cases, the Level 1 CFA is an “advantage”, but the knowledge gained from it is not a prerequisite for the position. In other words, having “passed” level 1 of the CFA on your resume doesn't mean that you automatically make it to the top of the list. As always, networking and interviewing skills are paramount.
CFA Level 1 simply gives you confidence, more to talk about in interview questions, and a nice line on your resume. In addition, it's an especially good item to have contacts with CFA certificate holders, since they have been in your place. In short, I would say that 300 hours is a good benchmark that you should overcome if you have been exposed to many of the topics before and are academically inclined. If you're completely oblivious to finance, you're going to have to spend a lot more time on it.
So, if you've decided that writing the Level 1 CFA is the path for you, here are some tips based on my experience on the best way to approach it. If you've ever heard the saying “garbage in, garbage out”, I firmly believe that it applies to the study. If you study poorly or use study materials that aren't right for you, you won't get good results. It's important to take some time to decide what your approach is.
Of course, I don't think that the good people at the CFA institute are deliberately designing a bad learning platform, but I still believe that the incentives are powerful enough that the products of external preparation providers are superior. I recommend that you browse the different preparation provider platforms, that you use free trial versions whenever possible, and that you decide what is what best suits your preferences. Personally, I used Salt Solutions and have only good things to say. Since their L1 content is actually completely free, it's hard to go wrong.
Do them after learning the content of each sub-topic. This is especially true in the case of ethics, where I find that the only real way to learn content is through practice questions. I've heard of this online strategy before. Some people believe in completely skipping difficult and underweight topics (for example, I suppose the idea is that you guess these questions, hopefully you get a couple of them right and use your strength in the other subjects to pass them on).
If you dedicate your study time to more weighty subjects and master them, you can pass them more easily. There's no formula sheet in the exam, you'll have to memorize the formulas (formulas, whatever). Write them down again and again on paper to memorize them. When asking practice questions, you can use a formula sheet to answer them.
But after answering the question, write the formula several times on a piece of paper and save it in your brain. Write as many mock exams as you can after learning all the content. Review the topics you're weak on between simulations. Once you've been exposed to all the content, writing mockery is the best way to learn. They expose you to a lot of practical questions, they give you an idea of your knowledge on all subjects and, most importantly, they show you exactly the chances of passing the exam itself.
The CFA Institute simulations have a difficulty similar to that of the exam. Those from my pre-preparation provider were a little more difficult. I wrote five mock exams, reviewing topics that were difficult for me (that is, when I obtained around 85% in my last simulation, I knew that I was ready for the real exam, since the minimum passing grade is usually around 70%).The content is boring and mostly memorized, but it's a very important topic and the questions are easy if you spend time. This is the topic that has the most weight in the exam after Ethics (between 13 and 17%).
The content is often dry and nuanced (e.g., truth be told, it's almost completely a memorization)). However, once you master the content, the questions are extremely easy to answer and can really improve your score. I spent most of my review time on this topic and it paid off. Start studying for the exam sooner rather than later.
I started about 7 months before the exam. I recommend 6 months or more. Some days will be busier than others. On less busy days, take advantage and study more. On the busiest days, it's OK to not achieve your daily goal.
Your energy levels also rise and fall. You can't control your feelings, but you can control how you respond with your actions. At least one month before the exam, you shouldn't learn any new content. You should dedicate your time exclusively to practice questions and mock exams. On the big day, make sure everything is in order.
You should minimize as many stressors as possible and maximize your physiological state. Pack your suitcase with everything you need for the previous day's exam (passport, calculator, drinks and snacks for rest, etc. Make sure you sleep well at night). Adjust your sleep schedule for the previous week or use a sleeping pill if necessary.
For example, I drank coffee two hours before the exam started to have good energy but not nervousness, and a little more coffee during the mid-exam break to avoid any risk of an accident. I even bought a new calculator just before the exam, just in case the other one ran out of battery. These are all very small details, but they add up. I hope this article has given you some idea, whether you're debating how to write the Level 1 CFA or if you've decided to approach it and want some tips. CFA Level 1 can be easy for some, especially if they already have a good financial background in college or because of the context of their work.
Many level 2 concepts are based on the basic concepts described in level 1; having a good foundation in level 1 helps. The CFA covers a wide range of topics related to investment management, ranging from portfolio management to professional ethics. Some study materials include a Level 1 upgrade booklet specifically for this purpose; I recommend that you keep it. Unless, of course, you have passed level 1 like Sophie and are trying to pass the CFA in 18 months, in which you can do it in 4 months (with some determination).
This is the main disadvantage of candidates who end up not passing: level 2 represents a big step forward in difficulty compared to level 1.
