Level 1

What is the most effective method for passing the CFA Level 1 Exam?

Level 1 of the CFA Exam: What to Expect

The CFA Institute suggests that candidates study for a minimum of 300 hours for each level in order to succeed. And, in order to do so, one needs have a thorough understanding of the concepts, which span over 3000 pages and are each thoroughly discussed. The essence of each topic is beautifully set forth in the Learning Outcome Statements, which gives a clear broader picture of what the candidate is expected to do, from "already covered in undergraduate" Equity / Fixed Income / Economics to "detailed-oriented" Corporate Finance / Quant / FRA to "basic yet core stuff" like Ethics to "specialized fields" like Derivatives and Alternative Investments.

The negative is that reading that many pages in such a short period of time might be a difficult task, especially if you work full-time. Third-party preparatory services fill in the gaps between limited time and growing knowledge. They reduce the curriculum into easily digestible bits while yet ensuring that the candidate has all of the necessary in-depth knowledge. The video lectures help applicants understand the material without having to read through several pages of the curriculum. However, rather of replacing the study material, employing a third-party prep provider as a supplement to your study strategy is suggested.

How to Study for the Level 1 CFA Exam

A total of 300 hours of study (excluding revisions and mock tests) is required to pass each of the three levels of the CFA. The majority of candidates, on the other hand, fall victim to the planning fallacy, in which they overestimate the number of hours required to complete the curriculum. It is recommended that you start studying six to seven months prior to the exam date. This will ensure that you thoroughly study each of the ten topics so that the principles get embedded in your mind. Many others, on the other hand, finish Level 1 studies in 2 to 3 months. The range of information will be visible when compared to a candidate who has studied for 6 to 7 months. The focus should not be on passing the exam but rather on mastering the material. This will assist you in laying a solid basis for future levels and your career as an Investment Management professional.

What You'll Learn in CFA Level 1

Let's talk about the relative importance of Level 1 themes, both in terms of their application in Levels 2 and 3 and their worth in providing you with the tools you need to evaluate investments.

Ethics

Ethics is a high priority for the CFA Institute, as indicated by the fact that it is the only issue that appears in all three levels with a consistent weightage of 10 to 15%. The primary reason for this is that the investment management industry is based on and revolves around trust, and those who work in it must be morally conscious of their activities and the impact they have on their clients, employers, and the industry as a whole. If thoroughly studied, this is one area where you can increase your score and even tilt the scales in your favor if your exam score is comparable to that of other applicants (the latter part is very speculative but the CFA institute has occasionally hinted about this).

Financial Reporting and Analysis / Corporate Finance / Economics

These topics will be relatively simple if you have or have had a financial degree. Candidates with no prior experience in finance may find it difficult to grasp a few concepts at first, but after the principles are grasped, these topics should be rather simple. The 35 percent total weightage reflects the proportional importance of these three themes.

Fixed Income/Quantitative/Equity

These are the pillars upon which the investment world as we know it is built. Understanding how it works, how it's constructed, what investing tools are accessible, and how useful it is are all key. This level's topics build the foundation for your knowledge, which will be put to the test in Levels 2 and 3. In this part, each subject is equally weighted.

Derivatives and Alternative Investments

The current coverage of specialty segments in the Investment Management industry is on a broad scale, providing a general introduction to the principles. Despite their low weighting, these two sections can help you enhance your exam score if you complete them carefully.

Portfolio management is the management of a collection of assets.

Portfolio management is the process of putting everything together and learning practical skills. The weight of this topic does not represent its relevance (the same topic has weightage of 35-40 percent in Level 3). Despite the fact that this is a very simple topic, it is strongly recommended that you master the core concepts here in order to have a more straightforward memory in tests and later levels.

Final thoughts...

Derivatives, Economics, and Quant are typically cited as the most challenging topics on the exam by candidates. To prevent ending up in the same situation, it is suggested that you strive to connect the principles to current events in addition to studying the materials (with the advent of the internet, no information is out of your reach, you just have to search for it). As you begin your study sessions, you will progressively be able to identify your areas of strength and weakness. Knowing what you know is important, but knowing what you don't know is even more important since it allows you to select the most effective technique for closing the knowledge gap. Remember that you're not just studying for the Level 1 exam; you're aiming to be the best in the Investment Management industry in the world, which will take time and effort.