CFA Study vs. Family



The title above is the title from a recent forum post on the LinkedIn group. While the underlying subject of juggling a personal life and family with the CFA exams is a constant topic, I thought the title was interesting and brought back memories of managing my own social life with exam preparation.

I thought the forum title was interesting because it is how many candidates feel about studying for the exams and…well, everything else. It seems that preparing for that 6-hour monster in June puts you at odds with everything else; your family, your friends, anything you previously enjoyed.

It’s tough to get in the necessary study time, for everyone but even more so for those with families. I was married while studying for the exams but was able to finish before we had any kids. The problem is, when you start to think of studying for the exams as, “this and nothing else,” you set yourself up for questioning whether it is worth it and end up postponing the designation.

Studying for the CFA exams shouldn’t be a this-or-that scenario but just needs to be integrated into your daily routine. Hundreds of thousands of candidates have done it and you can as well.

It is just a matter of making time where there was none before,

  • Lunchtime study – This doesn’t necessarily have to be cloistering yourself off to some remote part of the building and avoiding co-workers. A quick run through your flash cards while talking to co-workers can be a little less intrusive and still help you get some extra points.
  • Travel time – If there is any way you can take public transportation to and from work, this can be a huge boost to your study time. Sure, it may be a little inconvenient but shifting that hour or two of studying each day to the bus or train means more time with your family.
  • No rest for the wicked – This is the most common I hear but it has its limits. I concentrate better at night so it was no problem for me to stay up until midnight or later and study while others slept. You can get buy on five or six hours of sleep but don’t try to do it immediately. Try studying just a half hour more per night an increase it gradually so you don’t crash at work.
  • More efficient study – While the average time candidates take to study for the exam is 300 hours, it can be done on less but you need to spend your time where it counts the most. You will not be able to get through the curriculum multiple times. Spend more time on condensed study notes and working practice problems. For the first two levels, devote the majority of your time on the topic areas where you will see the most points.
  • Start earlier – I am still amazed that many of the same candidates that question how to juggle life with exam prep are the same ones that do not start studying until February or later. Three hundred hours divided by 26 weeks is a lot easier to handle than when it is crammed into 12 weeks or fewer. In fact, there is nothing that says you need to wait for the new curriculum to come out before you begin studying. Borrow the previous year’s curriculum from a local candidate and start working through it in July or August. Starting 40 weeks before the exam means you only have to study about 7.5 hours a week. That’s doable for even the busiest schedules.

It will be tough but will also be worth it. Not only will you be able to use one of the most respected and professional designations in the industry but you will also be able to say that you were able to complete something that few others could.

Families are forever, the CFA exams are only three years. Stay strong and push through it.

‘til next time, happy studyin’
Joseph Hogue, CFA

The Number One Rule to Break While Studying for the CFA Exams



Answering weekly emails I get from candidates, common themes tend to come up frequently. Candidates always want to know how the upcoming year is different from the last, what score they need and if passing the exams will get them a job.

Another common theme is rules they should follow for passing the exams. Everyone loves lists and being able to check off a couple of rules to help pass the exams is something everyone would appreciate.

We’ve covered lots of lists here on the blog, things to do and what to look for but there is one rule you might just want to break. It’s not my rule but it is one commonly held by many candidates.

The rule is that you should use the official CFA curriculum as the core to your studying for the exams.

I have advised candidates to read the curriculum and always tried to get through the books myself. The exams come directly from the curriculum so it stands to reason that the books should be your best bet for a passing score.

But the reality is that your time is just too precious and reading through the curriculum enough to commit the material to memory just takes too long. Candidates feel like the curriculum is the sacred text of the Institute and that memorizing every word will ensure them a passing score. I have seen too many candidates get burned out or not even make it through the curriculum once, and subsequently fail the exam.

I am not just saying this because Finquiz sells condensed study notes and I agree that you still need to use the official curriculum, just not as your core material and probably not in the way you were expecting.

Condensed study notes, by their definition, are going to leave some details out. The idea is that you can still master the LOS without all the examples and explanations but this will not be the case for every section of the material. To make up for this short-coming, you still need to use the curriculum.

While most candidates start with the curriculum and then study the condensed notes, I propose a different plan. Start with the study notes. Work through the study guides, working problem sets to make sure you understand the material.

Then read through the curriculum. Having already picked up the core concepts, you should be able to read at a faster speed. This will help you read through for any stray questions you might still have but will take much less time than if you had tried reading the curriculum first.

You might even try working through the study notes twice before going through the curriculum, depending on how quickly you can work through the condensed notes. Notice that you still need to work through practice problems and this more time-efficient method does not mean you can wait until March to start studying.

You still need to put in your 300 hours, this method will just allow you to go through the entire curriculum multiple times. Most people learn best by repetition and it is said that you need to repeat a task approximately seven times to commit it to long-term memory. You may not have time to go through the material seven times, but focusing your time on condensed study materials is a good way to get through the content faster and more efficiently.

Have another commonly-held rule that you should break? Email me or use the comment section below.

‘til next time, happy studyin’
Joseph Hogue, CFA

Top 3 Myths about the Claritas Investment Certificate



The Claritas Investment Certificate is less than a year old and the rumor mill is already operating at full strength. Many of the grapevine assumptions follow pretty closely with those that candidates hold for the CFA exams as well.

  • Obtaining the certificate will get me a job in the industry

This is probably the most common misconception for CFA candidates as well, that passing either the exams or getting the certificate will guarantee a job in investment management. While the CFA charter is well-respected and the Claritas Certificate is building its brand, neither are a sure-shot at landing your dream job. They will make you competitive and may get you an interview where you wouldn’t have otherwise but you’ll still need to work for the job.

Probably the most overlooked advantage of the charter or the certificate when job-hunting is the networking advantage. Though the exams are self-study, there is also a tremendous social network established around local societies. Talk to your local society to see if Claritas candidates can attend a networking event.

  • I need the Claritas Investment Certificate to begin studying for the CFA charter

I have mixed feelings on this one. I personally know several people that have used the Claritas curriculum as a start to their studies for the CFA charter. The Claritas curriculum is more generalized and starts a little slower than the CFA curriculum so it may help those with absolutely no experience in finance or investments. You will see a lot of information in the Level 1 exam that was in the Claritas program, so it is not time wasted but you may not need it either.

Passing the Claritas exam is not a prerequisite for the CFA exams and you may not need it to begin studying for the charter. At approximately 100 hours of studying, it is not an overly demanding exam but that is still 100 hours that you could be studying for the CFA Level 1 exam. If you want to eventually sit for the CFA exams, go to your local library for a copy of the Level 1 curriculum. If the material is completely foreign and you are not able to pick up the concepts, then you may want to start with Claritas.

  • You only need a 70% to pass the exam

Passing scores are annually a huge topic on the CFA forums and already have a few posts on the Claritas forums. The actual passing score is set by a standard setting process and changes regularly. The score needed to pass any of the exams is not released by the Institute but we do know that no one with a score of 70% or above has ever failed.

So just shoot for 70%, right? Well, yeah if you want to be the person in their career that barely squeaked by their professional exams. Besides that, professional development is a life-long process and those that think it ends after an exam or two will quickly find themselves downsized. Study until you master the curriculum then move on to new curriculum and new challenges.

Those seem to be the big 3 myths for the exam but there are bound to be more. Use the comment section below for other myths you’ve heard.

‘til next time, happy studyin’
Joseph Hogue, CFA

5 Things I Wish I Knew about the CFA Level III Exam



We’ve already covered the top five things you should know about the CFA Level I and Level II Exams, along with the exams in general. After the Level II exam, I enjoyed the final exam of the series though it presents its own challenges. If you approach it wisely, following these five points, the Level III exam can be just as enjoyable when you take it.

  • It’s all about the Essays

The essay portion of the exam terrifies many candidates and for good reason. Not only are you asked to come up with your own answers, much more difficult that picking it out of three options, but the essays present a physical challenge as well. When is the last time you spent almost three hours straight writing by hand? The post-exam party is filled with more than a few horror stories about muscle cramps and aching hands. You must physically prepare yourself by doing consecutive essay problems and writing for hours or you will not make it through the morning section.

Most of the topic areas are fair game for essay questions. The first two questions will always be on individual and institutional wealth management so being ready for those two topics can give you a huge confidence boost for the rest of the test. Corporate Finance, Financial Reporting, Quantitative Methods and Alternative Investments are the least likely to show up as essay questions but will be in the afternoon section. I covered the essay section in more detail in a prior post linked here.

  • The only exam with prior year’s available

Ok, this one is about the essays as well but I thought it merited its own bullet. The Institute releases the essay section, along with guideline answers, for the last three years. This is huge and I don’t think most candidates take advantage of it. Working through these essay questions not only helps you study the material and practice writing for an extended period, it also helps you write more efficiently and get a feel for the types of information for which the Institute is scoring.

We worked through several essay questions last year from prior years, click here and scroll through last year’s study plan. While only the last three years’ exams are available, you should be able to get prior years’ essays from members of your local society. Ask around to see if anyone has the pdf copies. It is well worth the effort to have a couple more sets of practice essays, especially in the all-important wealth management topic area. Make sure you check for LOS changes between the test year and the current year for material that has been dropped or changed.

  • Don’t get overconfident

You’ve made it through two of the hardest exams of your academic life and notice that the pass rate for the CFA Level III exam is above that of the other two. Sounds like it is time to sit back and ease through to your charter, right?

You have put in too much work to get lazy now. While the pass rate on the Level III exam, 49% in 2013, is higher than that of the other exams it is still incredibly difficult. Think about it, every CFA Level III candidate has had the perseverance and has put in the effort to pass the other two exams but less than half will make it through the exam this year.

Put in just as much time and work for this final exam as you did for the other two levels. Not only will you be rewarded with a passing score, but mastering the essay section will give you the ability to talk through these topics in your job.

  • Harder to ‘game’ the topic areas

You could clearly see in the other two exams which topic areas were most important and where you should focus your studying. The topic weights don’t help much on the CFA Level III exam. Ethics and the asset classes are weighted but the investment tool topic areas are wrapped up in portfolio management. This uncertainty throws some candidates for a loop and leads to inefficient use of study time.

Fortunately, by studying the prior essay sections, you can get a good idea of topic area importance. Look through the prior three years’ morning sections and you will see that the two portfolio management topics are always considered (with each historically above 10% of total exam points).

Again, studying these previous morning sections can give you nearly everything you need.

  • Do not wait until you pass the exam to start thinking about the charter

You will not immediately be granted the charter after passing the Level III exam. You first need to fill out an application for membership and acquire two sponsors that will answer questions on your experience. One of these will need to be your current supervisor, the other needs to be a charterholder from the local society. Now is the time to start talking to society members and establishing a sponsor. In my own experience, it is frustrating when a candidate comes out of nowhere and asks for a sponsor when you have never talked or really know what they do.

You will also need to complete the requirement for 48 months of professional experience. This is the sticking point for a lot of candidates and many have to wait years until they can use the designation. There is not much you can do if you are taking the exam this year and do not have the necessary experience. Review the work experience guidelines established by the Institute, linked here. If your current responsibilities do not qualify, you need to start looking at your options. Consider talking to your supervisor to add some responsibilities to your role that might help qualify.

As a level III candidate, you are almost there and the anticipation building up to the exam can be unbearable. Take a step back and realize that you still have one hurdle to jump. Study just as hard for the final exam as you did for the other two, maybe harder, and go into that first Saturday of June with the confidence to pass.

‘til next time, happy studyin’
Joseph Hogue, CFA

5 Things I Wish I Knew about the CFA Level II Exam



We’ve already covered the top five things you should know about the CFA Level I Exam and about the exams in general. The Level II Exam is, in mine and many other candidates, the most difficult level of the three CFA exams and it might be hard to narrow it down to just five things.

  • Don’t Underestimates the Exam

I was pleasantly surprised at the ease of the Level I exam. The exam was not necessarily easy but it was less detailed than I was expecting and I had studied more than I probably needed. While I am not sure that I consciously underestimated the Level II exam, I may not have studied as hard as I did for the first exam. The exam was harder than I anticipated and I was sweating bullets for the full six hours.

The CFA Level II Exam is arguably the most difficult of the three and also possibly the most important. It includes some of the most important valuation and analysis techniques that you will use as an analyst. Spend as much time as you can devote to learning the material.

  • It’s all about the Detail

While the first exam seemed a mile wide and an inch deep, the level II exam is a mile deep but covers less breadth. Sure there are still the 18 study sessions covering the same topic areas, but it seemed like only a fraction of the material in each topic was important but that fractional portion went into amazing detail.

Case in point, the financial reporting topic in the level I exam barely scratches the surface with a general description of the statements and how the relate to each other. In the level II exam, you will be looking at the accounting for individual line items within the statements and the calculations can get extremely lengthy. The CFA Level I exam was mostly questions on qualitative concepts, the Level II exam is much more quantitative.

  • Practice the vignette structure

The item-set structure of the CFA Level II exam throws some candidates. While the questions usually appear in the order that information appears in the vignette, it can still be a lot to read and remember.

There are two approaches to the structure. Some candidates prefer to read the questions quickly to get an idea for the information for which they are looking. Then they read through the vignette and underline relevant data. The second approach is to read through the vignette first, underlining data that looks important, and then go through the questions. After having gone through the curriculum and practice problems, you’ll have an idea of important information so it’s not entirely a guessing game.

  • Don’t buy your flashcards

Practice problems are even more important when studying for the Level II exam. The test is very quant-focused and there are quite a few accounting processes that you must remember within the FRA topic area.

Writing down the problems and processes is a much more effective learning technique than simply reading pre-made cards (remember active learning?). After working through the curriculum once, make flashcards for the more difficult and important LOS on your second run. Instead of simply writing the calculation and variables, try to make the cards as much like word problems as possible to simulate the exam. After several runs through your flashcards, you may even try re-writing the ones that are most difficult.

  • You are not alone

Despite being a self-study course, understand that you do not have to go it alone. There are really two tips here. First, you are in the middle of one of the most difficult professional curricula out there. You passed the first exam but it may be hard to see the light at the end of the tunnel. Most candidates approach their breaking point studying for the Level II and you need a support system to get you through. Friends and family are the obvious choice but seek out a couple of candidates as well. Take 15 minutes a week to talk about your studying and motivate each other.

You may also need help getting through some of the intense calculations and accounting within the Level II curriculum. No matter how hard I tried, I could not seem to get through the derivatives material. Whether it’s another candidate or someone with professional knowledge in the topic, it may be helpful to have someone explain it from another perspective.

Half of passing the exams is studying more effectively and not being surprised on that first Saturday in June. Knowing and avoiding some of the biggest mistakes candidates make will put you well ahead and help to get you through to the next exam. We will cover the five most important tips for the CFA Level III exam next week.

‘til next time, happy studyin’
Joseph Hogue, CFA

5 Things I Wish I Knew about the CFA Level I Exam



Last week, I listed out the things I wish I knew before each level of the CFA exams. For the most part, these were the general ideas that relate well across all three levels. This week, I am reminiscing back to those bygone days of the Level I CFA exam.

I remember it well, o.k. probably because it was only five years ago. So naïve and full of mistakes, mistakes that hopefully you will not have to make.

  • It’s Not like College

I may be wrong and it just may be my cynical side but most public education seemed to me more about getting grades than learning. You showed up, took the tests and that was it. And the tests really were not that difficult. School was fairly easy, even up to my bachelor’s programs. Sure there were some tough spots when I would put off a semester project but a couple of late nights and it would be easy again.

That’s not the CFA exams and most people get this rude awakening in Level I. If you are going to remember enough to answer 240 questions in six hours, you will need to do more than just open the books. You are going to need to do some detailed learning. While the first exam does not require the synthesis required in the Level III CFA exam, you will need a solid understanding of the material. Take it seriously and put in the time.

  • You Might Not be as Ethical as You Thought

Ethics is probably the topic that catches the most candidates off-guard in the CFA Level I exam. You do not lie, cheat or steal so you assume that you can pass the topic area with relatively little studying. How hard can the questions be, right?

Then you get to the exam and find out how masterful the exam writers are at making a seemingly easy topic complicated and subjective. Of the three possible answers on the exam, there are usually two that sound like a legitimate solution. It gets even worse when one of the possible answers is, “no violation.”

Do not neglect the Ethics portion of the exam, especially since your score on the topic will determine a pass or fail if you are close to the passing score overall. Go through the practice problems at the end of the chapter several times. This will help you understand the Institute’s way of thinking about these ethical dilemmas.

  • Financial Statements are Your New Religion

The material on Financial Statements and Reporting is the single most important, points-wise, on the Level I CFA exam. It is also in the top two or three most important in the second exam. For many, the material on the first exam is fairly basic, just a review of the financial statements and some common ratios. They skim through the material, skipping the more difficult detail, and move on to other topics.

Financial statements are the heart of what you will be doing as an analyst. Spend all the time you can on this topic. Not only is the topic absolutely key to passing the exams, and you absolutely must have a strong understanding to handle the detailed material in the Level II exam, but you will need all the material daily in your professional career. You might get away without using much from some of the other topics on a daily basis but you will always need to know how to read and analyze a financial statement.

Learn it early or you’ll find yourself continuously coming back to review.

  • No Substitute for Practice Problems

O.k. this one is applicable to all three exams but it catches most by surprise in the first exam. Most of us are fairly intelligent and, until the CFA exams, have been able to get by easily by just reading through textbooks or listening to a lecture.

This will not work for the CFA exams. There is just too much information that you need to remember to have a superficial understanding. The practice problems serve two purposes. Most importantly, they drill the information deep enough into your memory that you can reproduce it on the exam. Only through actively thinking about the curriculum are you going to remember all that information. Just read through it and half of it is going to go in one ear and out the other.

Practice problems also help you physically and mentally prepare for the exams. Six-hours of sitting there scraping your brain for information can be extremely tiring. If you have not exercised your brain and body to do this kind of thing for consecutive hours, you will be surprised and disappointed.

  • A Mile Wide and an Inch Deep

When I finally got to the level I exam, I was surprised that the questions did not go as far into the detail as I was expecting but the breadth of material was amazing. This is a tough one because I cannot tell you not to worry much about the details, you’ll need a strong base in the material to understand the Level II curriculum, but the first exam seemed to only test a basic understanding of the material.

If I knew that while I was studying, I probably would have used the study guides more rather than the curriculum. These are not going to go into the detail to the extent that is in the official curriculum, but they will help you cover all the material multiple times.

Hope this helps you on your Level I CFA exam. Let me know if you Level II and Level III candidates have any other tips. Next week, we’ll look at the five most important study ideas for the Level II exam.

‘til next time, happy studyin’
Joseph Hogue, CFA

5 Things I Wish I Knew Before Starting Each Level of the CFA Exams



One of the most difficult aspects of the CFA exams is that you are basically on your own. Sure there are study groups but these are composed of candidates in the same exam level and probably making the same mistakes that you are making. You’ll get some support from your local society (if you ask!), but for the most part it’s a self-study course and you will need to learn how to approach the exams just as much as learning the material.

While each exam is different, there are some commonalities in studying for all three. Over the three years, I learned the hard way how to best use my time and what was just a waste of time. Sometimes, I had to learn it over again on the following exam. Hopefully, this list will help you not repeat the same mistakes I made.

  • Study smarter, not harder

I would start every exam trying to get through at least two readings of the official curriculum. While the curriculum is the first and last word on the exams, trying to get through that much material twice is a recipe for burnout. I would invariably start my second time through and could not keep my eyes open or concentrate through more than a few pages. You need to work through the curriculum at least once but there are more efficient uses of your time after that. Study guides are typically a fifth the length while getting across at least 90% of the information. Flash cards and problem sets are another way to use your time more efficiently than wading through thousands of pages of text.

  • More problem sets, less reading

This one is related to the first but applies to study guides as well. It is too easy to sit back with a book and read instead of actively working those problems. I was as guilty as anyone on this, thinking that I would absorb the material just by reading. If you want to be able to work the problems on the exam, the single best method you will find is working the practice problems from the curriculum or from test banks.

  • I will not get some subjects and that’s ok, learn it early

Most of us are Type-A personalities, control-oriented and motivated. We want to plan everything out and have a hard time progressing without having completed every previous task. This was a problem for me in some of the derivatives material (i.e. swaps). I would spend hours practicing and studying relatively minor stuff when I should have just gotten the basic idea and spent more time on the higher value topics. You cannot afford to neglect any single topic, but you also cannot afford to spend all your time on topics that carry relatively fewer points. Make sure you understand the parties involved, how different drivers (i.e. changes in rates) affect the contract and then move on to other subjects.

  • Don’t study at home

Unless it takes you an hour to get to somewhere you can study privately, resist the urge to only study at home. You might still study at home by filling in gaps of ten or twenty minutes by looking over notes or flash cards, but your core study schedule should be somewhere else. There are just too many distractions at home and your time will not be spent efficiently. The library was usually the best study site for me. It had just enough background noise but privacy to simulate the testing environment.

  • After the exam, let it go!

This won’t help you on the exam but it can help save your sanity afterwards. Do everything you can to prepare for the test and have the confidence to relax after it’s over. Those precious few months after the exam are for getting back into your social life and spending time with your family, not worrying about whether you passed or failed.

Next week, we’ll look at things I wish I knew before the level I CFA exam.

‘til next time, happy studyin’
Joseph Hogue, CFA

A CFA Blog! How long has this been here?



Now that you are firmly focused on studying and passing the CFA exam in June, let me digress and ruin your concentration. Sorry, I just came across the CFA blog managed by the Institute and was so impressed that I wanted to bring it to your attention.

Where have I been?
In our hectic daily routines, it can be tough to find new sources of information. It certainly doesn’t help that there are more than 350 million registered domains, an increase from virtual nonexistence only two decades ago. I have 11 sites bookmarked to my navigation panel (Federal Reserve FRED, Bloomberg, Morningstar, along with email accounts and a few other finance sites) and probably only use a handful of others on a daily basis.

I am plastered to my screen between eight and ten hours a day, sometimes including weekends, and just do not have time to hunt around the web for great new sources of information. I generally try to keep up with things the CFA Institute is doing, especially the newer ideas but this obviously wasn’t the case with the new blog.

I have to give credit to Josh Armstrong, CFA for posting one of the Institute’s blog posts on the forum group. I regularly read the Financial Analysts Journal and other publications sent out by the Institute, along with other research posted on the Institute’s site. When I found the blog site, the material was familiar but offered an ease of reading that was great.

Across the blog’s navigation bar is six categories of posts along with nine other categories from the CFA topic areas and a link for About Us and Authors. Clicking on each category will take you to posts specific to it but the site does not include a dated directory so finding a specific post can be a little difficult. It is also nearly impossible (or at least impossible without loosing your sanity) to find the original posting date of the site since you have to scroll down and click, ‘older posts’ continuously.

The posts run the gamut of research, polls, book reviews and advice. Twenty-eight posts were written in December, pretty impressive considering most people are more focused on their holiday weight gain than on financial writing during the month.

As blog posts, the content comes across as more conversational and easier to read than some of the Institute’s other publications. While this may not be as welcome to some of the hard-core researchers out there, I enjoyed being able to make it through an article without taking a master’s level course in stats. Posts include links to other publications and other helpful sites.

If you can find a couple of hours in your busy weekly schedule of work and study to visit the blog, your time will be well-rewarded. The blog does a good job of highlighting important material from the Institute’s site as well as some new stuff. You probably won’t read all of it but it will offer a quick way to keep up-to-date on some important ideas in the industry. I have bookmarked the site and will probably go back at least a couple of times a week.

Always on the lookout of good sites for market information and data. Any ideas?

Ok, digression over. Back to studyin’
Joseph Hogue, CFA

Your 2014 CFA Study Plan



This is it! January is upon us and I can hear the pencils sharpening in preparation for the 2014 CFA exams. Ok, probably not pencils but I hear the laptops whirring to life and we’ve just five short months left to test day.

We won’t be posting a weekly review of the study sessions like we did last year but most are still relevant for this year’s exam. The study session reviews covered each topic over 18 weeks starting in January and starting with the ethics material.

Make sure you check our post on changes to the Learning Outcome Statements (LOS) for each exam so you can focus on the material that could appear on this year’s exams. We posted the changes to the CFA Level I and Level III exam in August and the changes to the CFA Level II exam in September.

22 Weeks of Good Fun Studyin’

You might be tempted to give yourself another couple of weeks vacation and start studying with a nice round number like twenty weeks, but you’ll need every hour if you are going to pass one of the hardest professional exams out there. Spending about 300 hours over 22 weeks means you’ll still have to dedicate between 13 and 14 hours a week.

I get a lot of questions each year about how to study the curriculum to prepare for the exams. My best answer is…yes, study! It’s not quite the answer expected but the simplest answer could also be the best. We’ve gone through different methods of studying here on the blog, looked at the difference between active and passive studying and talked about the topic weights on the exams. The most overlooked tip though is that candidates need to worry less about how to study and get to studying. Studying the curriculum does not mean putting a plan together that gets you through the material once before exam day, you need to be prepared and that means committing the material to long-term memory.

Committing the material to long-term memory means reviewing it multiple times and in multiple forms. Since we still want to finish early enough to review the more important topics and focus on mock exams, you’ll need to start as soon as possible. The plan below isn’t complicated but it is intense. It’ll be tough but you’ll review the material enough times that it will be seared into your brain well after the test has come and gone.

The plan begins each week with reading the curriculum for the next study session (1-18) and completing all the blue-box and end-of-chapter questions.

The following week, you read the curriculum for a new study session and review the previous study session through the use of condensed study notes. Beyond reviewing the study guide for the previous session, you need to do some testbank practice problems to reinforce the material.

In the third week, review the individual LOS for the study session and write up flash cards for the concepts that you still haven’t mastered. After 20 weeks, you will have reviewed each study session three weeks each and done several rounds of practice problems. Reading the curriculum for a new study session each week will take the majority of your time but try to fit in the reviews and problems as well.

Starting in week 18, try to complete two full-size practice exams each week. Whether formal mock exams or just a 120 questions from test banks, try to do these in the approximate percentages for each topic area. This should give you a good idea of the topic areas in which you need more work.

By week 21, you are going to be tired of anything CFA-related and will deserve a break. You won’t have the luxury of completely relaxing but just review your flash cards for an hour each day.

Your final week is an intensive review. Take the week off from work if you can and treat studying like it was your full-time occupation. Eight hours a day should give you enough time to review two study sessions a day and work a full-length exam.

By now, the practice exams are only partially to clue you in on your weak points but also help to get you into the mental preparedness of handling a six-hour exam. Complete them as you would the actual exam, in two 3-hour segments and in a relatively quite setting.

Go over the curriculum that many times and I have no doubt you will go into the exam fully confident in your mastery of the material. Make sure you follow our last minute checklist for preparing for the exam, available by clicking here.

And good luck on the exam, it’ll be here before you know it.

‘til next time, happy studyin’
Joseph Hogue, CFA

Top 5 CFA Exam Posts from 2013



As we wind up another year on the blog, I thought I would run through the most popular posts over the last twelve months. Most popular does not necessarily mean best or most useful, I’ll need your help in finding those. I would like to think that the most popular are such because they were passed around and read frequently, a result of them being useful as well.

While the three posts describing LOS changes to each exam were all very well read, I’ve excluded them from the list. It doesn’t do us much good to review what LOS changes were made last year but we’ll get the list of next year’s changes out soon.

February 8th Are you ready for the June CFA exam, have you started yet?

I did a quick poll on LinkedIn to see where candidates were at in their study schedule. As of early February, 16% of candidates had finished at least 60% of the curriculum while 56% had not seen more than 20% of the material. It was an informal poll and there were questions unanswered but there were some lessons to be learned. Don’t count on being able to skim through the material once and do well on the exam, most brains just don’t work like that. Most need to see something several times before it is committed to long-term memory.

December 2ndThe passing score on the CFA exams and how to use it

The actual score or percentage needed to pass the exams is never released but it remains a popular topic for candidates. We know that no candidate has ever failed with a score of 70% or above, so that has always served as a good target. We also know that nearly half of all candidates fail their exam in any given year, which can help to gauge your own progress anecdotally against the rest of the herd.

The 70% target also offers a sober reminder that the exams are more than just a set of multiple-choice questions or essays, it is a gauge of your professional knowledge. Would you trust someone that scored less than two-thirds on their professional exams to handle your money?

January 4thThe Tortoise and the Hare study plan for the CFA exams

I’m always amazed how late some candidates choose to start studying for the exam. While I prefer a slow-and-steady approach to studying, I recognize that some work better under pressure and prefer a later start. In this post, I present two study plans – one for the tortoise and one for the hare.

Even the tortoise study plan, with 20 weeks and 15 hours per week, may be too demanding and I normally started much earlier than this. Still, I think it provides a realistic goal of one study session per week and two weeks of review.

The hare’s study plan is only for those that can clear their schedule completely and devote 30 hours a week over the last nine weeks before the exams. This would be nearly impossible for most candidates but maybe just the right amount of pressure for some.

May 17thAre the actual exam questions easier or harder than mock exams or practice problems

As important as the practice problems are to passing the exam, I am not surprised that this post was widely read. Doing hours of practice problems is probably not your preferred choice of study method but it is probably the best way to spend your time. It helps to gauge your understanding of the curriculum and gets you ready to handle the 6-hour marathon that is the CFA exam.

Whether the practice problems or mocks are easier or harder than the actual exams, you need to do enough of them to build a confidence interval around your score. This allows you to guide your studying until your interval range encompasses that all-important 70% score.

May 28thI’ve passed the CFA Level 1, why don’t I have a job

Using the designation to get a job is easily the most popular forum topic, so it’s given that this would be the most popular post of the year. Whether you’ve already got a job and are looking to move up or you think the exams will get your foot in the door, it can be equally frustrating when it doesn’t all fall into place.

I can tell you that the CFA designation and the knowledge you will gain from the curriculum will help you succeed in the industry. It is one of the strongest and most respected bodies of knowledge in the industry and your perseverance does count for something. I can also tell you that you will still have to fight for the job you want. Use the same perseverance and hard work you put into the curriculum to get your foot in the door and you will not be disappointed.

‘til next year, happy studyin’
Joseph Hogue, CFA

Remembering more of what you study for the CFA Exams



One of our most popular posts, and probably in the top ten of most important, covered the difference between active- and passive-learning. Available by clicking here, the post separates different studying methods and shows candidates how to remember the majority of what they study. While no method is fool-proof, people typically remember up to 90% of what they study when using active-learning methods.

As a quick recap, though I urge you to read the original post, active learning is any method in which the student takes a participatory approach. This includes doing problems and discussing the material. Passive learning involves non-participatory studying like reading or watching a lecture. Studies show that students are more engaged and remember more when they learn by active methods.

Making passive-learning more active
The problem is that passive learning methods, reading especially, are the primary sources of learning for most candidates. Let’s face it, we would all rather sit down and casually read through the curriculum than grind through hours of practice problems. Preferences aside, you have to read through the material before you can do those practice problems anyway.

So how do you bridge the gap between passive and active learning? You still need to hit those practice problems but there are several ways that you can make passive-learning methods more active.

  • Making notes while reading is the most often used but underappreciated study method. Noting important ideas in the margins of the text not only highlights material for your subsequent reviews it also keeps you from falling into reader’s trance. Reader’s trance (also common in driving or other repetitive tasks) is where you perform the task without even thinking and end up pages ahead without remembering what you read. By stopping to take notes, you avoid zoning out.
  • After each section or chapter, take the time to explain the material in your own words. This works best if you can explain it to someone else but that isn’t always possible or time-efficient. If you cannot explain it to yourself then you will probably not be able to recall it on the exam.
  • While listening to a lecturer or to recorded material, take notes and do not be afraid to ask questions. If you do not understand what the lecturer is saying, there is a good chance that another in the class also needs clarification.
  • While watching videos, take notes and pause the video regularly to do a practice problem relevant to the section.

The more methods you can incorporate into your studying, the better you will learn. Seeing the material will most likely remain your primary mode but try to hear it and say it as well. Joining a study group can go a long way to making the learning experience more active. Just remember to keep the group organized and stay on task so you use your time efficiently.

Use the comment section below to share your favorite active- or passive-learning exercises and how you manage a balance between the two.

‘til next time, happy studyin’
Joseph Hogue, CFA

‘Tis the Season for the Bigger Picture



It shouldn’t take the holidays to remind us of our responsibility to help each other but it usually does.

In the grand rush to learn how to make our clients as much money as possible, and to do pretty well ourselves, it’s easy to lose sight of the truly important things in life. Don’t get me wrong, I am not ready to lay down my financial calculator and devote myself to world peace but maybe our success as charterholders and candidates enables us to do something bigger than just make money.

‘Tis better to give and receive
I like to receive just as much as the next guy but how much does a person really need? I’m not rich by most measures but I live comfortably and will have more than enough to meet my financial goals.

If that were all there was to life, it would be a terribly depressing journey. Fortunately, as professionals, we have the opportunity to make a bigger contribution to the lives of others and the CFA community is not without its heroes.

The CFA Institute established a scholarship program for dependent children and spouses of September 11th with an initial contribution of $1 million. The Institute also donates needs-based curriculum scholarships each year and individual societies donate time and money in the millions of dollars to better their communities.

Banks and other financial institutions are among the most charitable corporations every year. JP Morgan, Bank of America, Goldman Sachs and Wells Fargo were among the top ten corporate givers in 2012 with almost $1 billion in cash donations.

Bill Gross, the bond guru and CFA charterholder, has donated more than $125 million over the last decade to a variety of causes and institutions. Mr. Gross is the largest donor to Doctors Without Borders in the organization’s 42 year history.

Compassion starts at home
Changing the world doesn’t have to mean donating millions of dollars. Your knowledge of financial matters may be worth much more than you know. Try donating your time to local causes. Ideas as simple as debt and responsible budgeting are sorely needed in some areas. Volunteer to help aspiring entrepreneurs with their business plan or help them understand their financial needs.

Most societies have a committee for local giving and community programs. Volunteering with the society can be a great way to give back to your community and make some strong networking connections.

Start big or start small, you can still have a huge effect on someone’s life and maybe make the world just a little bit happier this holiday season.

‘til next time, happy holidays!
Joseph Hogue, CFA

Why Employers Like the CFA Designation



One of the most contested questions on the CFA forums is whether the charter, or passing the exams, will help you get a job. Despite my constant grumbling that the experience is worth it simply for professional development, candidates still look to the charter to help gain employment. Imagine it, the nerve! ;)

Rest easy candidates, I can tell you from my own experience (and from the experience of many others) that your hard work is appreciated and will be rewarded. Employers love to see the CFA on your resume.

It’s not just charterholders and the Institute
You would expect other charterholders to talk well of the designation and look to other members as employees. We know full well the kind of hard work and dedication that goes into earning the right to those three little letters. I have seen whole firms that seem to employ exclusively charterholders and it is usually the result of a charterholder at the top making decisions. It doesn’t take long looking through postings for analyst opportunities to see more than a few, “CFA charter or progress required.”

But it is always those outside voices that strike me as the most convincing. Those employers I talk to that have not sought the charter for themselves but recognize the quality represented by someone willing to put in the long-hours and hard work.

One of my first freelance writing projects was for the quarterly advisor newsletter of the Baxter Credit Union. Over the one hour phone conversation, the hiring advisor spent at least 20 minutes talking about the great things he had seen from CFA charterholders. Here I was looking for a job and the interviewer couldn’t stop congratulating me on my accomplishment!

My current employer, a venture capital firm out of Canada, requires that all analysts be charterholders or are candidates for the exams. It was imperative to management, when putting together a team of sell-side analysts, that they find people with a high standard for ethical and professional behavior. Having the charter does not automatically make you an honest person but employers know that, besides their own code and standards, charterholders are bound by the CFA Code and Standards.

And these are only two firms of the many that I’ve talked to and have explicitly favored charterholders or candidates in the hiring process. It’s especially true at small firms and for contract positions. These firms might not have the resources or time to fully train a new analyst. By hiring charterholders, they know that their new employee has a minimum of exposure to a range of topic areas through the curriculum.

A strong tool but not the whole toolbox
Obviously, earning the charter or having passed the exams will not get you the job versus a much more qualified and educated job hunter. Completing the three exams is not the last professional development you’ll need. Look to the Institute for research or seminars. Take an honest look at your resume and improve on those areas where you are lacking.

It also cannot do the networking for you. You still have to be aggressive in your job search. Make calls and go to professional events. Ask for the interview and send your resume.

When they see the hard work you have put into the CFA exams, they will take a second look and that effort will be rewarded.

‘til next time, happy studyin’
Joseph Hogue, CFA

The Passing Score on the CFA Exams and How to Use It



Candidates are heading to the December exam and questions about the passing score will soon follow. While the Institute does not publish the score needed to pass the exams, there are some important lessons to learn from what we do know.

Pass rates and the passing score
When you see your score, it will not be a single point percentage but a range of <50%, 50% to 70% or >70% across each of the topic areas. Not sure exactly why the Institute does this but it doesn’t matter too much, the ranges will serve our purposes here.

The score needed to pass the exam should not be confused with the exam pass rates which are the percentage of test takers that pass their level exam each year. These have been trending down over the last several decades with less than half of the candidates now passing. Everyone has their own theory on why this is happening but the fact is that these are some tough exams and you’ll need to prepare to do well.

So how many points do I need?
Each multiple choice question on the exams is worth three points with 360 points possible. The passing score varies from year to year and is determined after all the exams are graded for a particular level. Since the Institute does not publish an actual passing score, the only thing we do know is that no candidate has ever failed with a score of 70% or higher.

There are two important points that I always tried to remember when taking the exams. First, if I aimed for (and scored) at least 70% on the exams then I would pass the exam. Second, because the actual passing score is adjusted up or down on the distribution of actual scores and approximately 50% of candidates passed the exam, I needed to work harder than the average candidate to come out ahead.

Targeting a score of 70% or higher is something we’ve talked about on the blog. Whether you have a test bank or use end-of-chapter questions (or hopefully both), it’s pretty easy to track your progress and build a confidence interval around your performance. On these practice problems and mock exams, I would aim for something higher than 70% just in case the actual exam questions turned out to be more difficult.

Working harder than the average candidate is not as easily quantifiable. It isn’t that you are competing against other candidates, but you do need to understand that the charter isn’t for the ‘average’ finance professional, it is for those willing to go that extra mile for their career and their clients. While there are not a lot of ‘average’ candidate stats to go on, we know that 300 hours is an average for time spent studying. I would say that the average candidate also waits to start studying until late January, at the earliest.

Pass or fail, your score is more important than you know
The CFA exams are extremely tough and it’s understandable that candidates would want to know exactly what they need to do to pass but your score is more important than just passing the exam.

If the passing score is under 70%, that means candidates can miss almost a third of the information and still be on their way to being charterholders. No one is expecting you to remember 100% but working in the industry carries a great deal of responsibility. Think about it for a second and ask yourself if you would want someone planning your financial future that scored less than two-thirds on their professional exams.

For many candidates, seeing the result of their CFA exam is a sobering experience. Knowing that you scored less than 50% in a topic area should be a wake-up call and guide your studies in the future. I won’t say that I have used the entire curriculum since earning my charter but I have used a great deal of it and am glad for the time I put in to learn it.

I know that passing the exams is the first and last thing on your minds right now, just getting this three-year study-fest over with so you can reap the rewards, but try to remember why you are taking the exams in the first place. The CFA curriculum will make you a stronger professional and will help you for decades after you’ve passed the exams. While a passing score is important, reach higher and be better for it.

‘til next time, happy studyin’
Joseph Hogue, CFA

Will Claritas Help Me Get A Job? It Did For One Candidate.



I interviewed Robert Tolstykh a couple of months ago about his decision to study for the Claritas Investment Certificate and his longer-term goals. I am happy to say that I’ve talked to Robert recently and he has passed the exam. Even better, he has landed a job as a client service associate at an advisor shop.

While we cannot know if he would have gotten the job without the Claritas Investment Certificate, I would bet that it didn’t hurt his chances. I talked to Robert over email to get his take on the certificate and any advice for future candidates.

What sections do you think were the hardest? Why?
The fifth module was the most difficult for me. Specifically investment vehicles and structures and investment market characteristics, the reason is because it seemed that they were pretty comprehensive and included many details about the specificities of the subjects that were mentioned. The entire fifth module felt that way.

What sections did you find easiest?
The easiest section was the seventh module, including investor’s needs and investment policy, and active and passive management. These chapters seemed concise and to the point where it was easy to get a grasp on the subject at hand and relate to it.

Were there any sections on the exam that surprised you as easier or harder?
Investment instruments (module 4) surprised me as not being too difficult, because I imagined that it would be more confusing and harder to undertake than it really was.

What would you do differently in your studying?
I would not read every chapter twice. I think that is not necessary and it takes up too much time in the beginning and you may not have enough time or as much as you would like in the end.

About how long (total hours) would you say you spent studying?
I spent 100+ hours of studying for the entire exam

Could you describe your new job and how the information from the Claritas program is useful?
My new job is exactly what I was studying for; this is why I was able to leverage this program along with my passion into a new career change and job. My job deals with client services in a wealth management firm and the things I learned from the Claritas program. I see the material on a regular basis and read about them and practice them as well.

Anything other insight or advice for other candidates?
I would say if you would like to get an entry level welcoming into the investment world, then the Claritas is a great choice. It gives you the fundamentals of the industry. And as long as you have a passion and keen interest in finding your place in this field of work, then it can ignite more interests and keep you going for higher education.

Thanks for the response Robert. If that isn’t enough to motivate other Claritas candidates, I don’t know what will.

Good luck on your new job,
Joseph Hogue, CFA

4 Reasons You May be Too Late for the June Exam



November is almost over and you haven’t started studying for the 2014 CFA exam yet? I know it seems way too early and every year I bark up the same tree that candidates need to start studying earlier. Every year the majority put it off until later…then much later. Some are still successful, others not so much.

I’m not just trying to fill space and there really are some strong reasons for starting early.

300 hours is a lot easier in 28 weeks than in 17
If the average time spent studying to pass the test is 300 hours, then what does your Level I statistics tell you? Sure you might get away with a couple of hundred hours studying but do you want to take the chance? You can spend 150 hours and probably have to spend another 300 for the same exam next year or just spend the necessary amount this year.

I don’t know what your schedule is like but mine was busy when I took the exams. It is hard enough fitting in 10 hours of studying a week, let alone15 hours or more.

Stress, stress and stress
If you haven’t been on the forum long then you haven’t seen what happens around March or April before the exam. Candidates start FREAKING OUT! There will be no less than ten forum posts asking if it is too late to begin studying [in April] and asking desperately what to do. Even the candidates that start with what they think is enough time in February still feel the stress of the first Saturday in June.

Now imagine the sigh of relief you’ll have seeing those forum posts and knowing that you are prepared. Having started no later than November for all three exams, I was able to go through the curriculum, study guides, flash cards and a mountain of practice problems. Yeah, I was still worried but I knew I would pass the exams.

Life
So you’ve outlined your study plan and will have plenty of time to start in late February. Fifteen weeks of 15 hours a week and you’ll take a week off work for an intensive review. No problem.

If you are clairvoyant enough to know that it will work out exactly that way, then call me and we’ll go to Las Vegas. Life is what happens when our plans don’t come out exactly. What happens when your boss won’t give you the time off work? What happens when you get put in charge of that dream account that will lead to a promotion but will mean long hours? What happens when your kid’s team makes the state finals and you are traveling for two weeks?

What happens when life gets in the way and you come up short studying? Better luck next year.

It’s your profession, learn it
The most simple and best reason – because the curriculum will make you a better analyst. If you do not want to be a better analyst or money manager then you need to find another profession. This industry is incredibly competitive and only those that make the time to get those extra few basis points of alpha will survive.

Don’t think of it as studying for a test, where all you have to do is memorize enough material to pick the best of three choices. This is the easiest professional development you will do in your career. Everything is laid out and organized in a few texts complete with practice problems. Enjoy it, enjoy your career.

You’ll get other advice from charterholders that say they studied for just a couple of months and had no problems. It may be true or they may just be remembering things how they want you to see them. Ultimately, it’s your choice when you want to begin studying but I hope the reasons above are enough to convince you to start sooner rather than later.

Be the tortoise, not the hare.
‘til next time, happy studyin’
Joseph Hogue, CFA

Your December Level I Checklist



Just four weeks left to the big day for December candidates and I am remembering my own Level I exam with fondness. I took the exam in June 2009 and did fairly well but there were still a few things I wish I had taken care of before the test. Most of these scattered within older posts on the blog but I thought I would compile them here so you don’t have to search.

Do at least 900 practice problems
I can’t think of a better way to prepare for the exam than by doing exam-type questions. From my own experience, along with talking to candidates, 900 practice problems seem to be a pretty good target for understanding the curriculum. Do at least 360 of these in 180-question blocks to simulate a full exam. Make sure you are tracking your performance within the topic areas as well as across the curriculum.

Don’t let the Ethics material surprise you
Ok, this is more of a goal than a checklist item but it is more important than you know. Everyone thinks they know ethics until they take the test. The Institute is legendary for writing questions and answer choices that have you second-guessing yourself. The material is worth 15% of your score and a big part of the other exams so you need to master the topic. The end-of-chapter questions are a good example of how the exam questions will go. If possible, I would recommend getting other year’s texts and doing the questions in those as well (ask other candidates or your local society who might have the books).

Studying financial reporting will pay off now and in future
This section and the one on Ethics account for more than a third (35%) of your total score and a big chunk of the other two exams. As a financial analyst, does it surprise you that the topic of Financial Statement Analysis would be a big part of the test? More than just passing the Level I exam, you need to master this basic material to be able to handle the Level II and III material.

Think breadth not depth
Candidates rightly say that the Level I exam is a mile wide and an inch deep while the Level II exam is an inch wide and a mile deep. The exam surprised me for its breadth of material but was actually fairly easing on detail. You really need to master the two sections above, but I would focus on quantity rather than quality for the rest of the curriculum. Make absolutely sure you have a good understanding of all the definitions and the larger concepts.

Note that this changes in Level II where I feel the focus is on a detailed understanding of less breadth.

Check those docs and your test route
How much would it suck to do all that studying and then not be able to take the exam? Nobody believes they will have a problem on test-day but there are always candidates at every site that arrive late or do not have the correct documents. I put together a test-day checklist in a previous post and found here, that includes Institute policies and suggestions for that all important day.

http://www.finquiz.com/blog/2012/05/28/cfa-exams-last-minute-checklist/

Not a complete to-do list but I think it will get you 80% of the way. Please let us know your own list in the comments below so we can pass them along.

‘til next time, good luck in December.
Joseph Hogue, CFA

Claritas Curriculum Review: Chapter 6 Microeconomics



If you didn’t fall asleep studying quantitative methods in chapter five, microeconomics might just do the trick. I will be the first to admit that the material can be dry at best, and I’m an economist!

As part of module 3, worth 20% of your score, you can’t afford to neglect the material. Thinking of each concept in real-world terms, i.e. how does General Motors decide how many cars to make, can help to make the material more interesting.

Introduction
The broad definition of economics and the difference between micro- and macro-economics are important here. Economics is just how people use limited resources. Macro-economics is the national and international-level details so data like inflation, unemployment and GDP. Micro-economic, think micro = small, is the individual level for people and businesses. This is going to be data like selling prices, production costs and revenue.

The curriculum seems to cover a lot of material but it looks like basic overview stuff and you should probably just focus on the main points within each section. Much of the chapter lends itself well to flash cards for definitions.

Supply and Demand
The respective curves are important and you should remember how each is affected by different changes. Important is the difference between a shift in the curve or movement along the curve. Changes in income, substitute prices, preferences, etc will cause a shift in the demand curve while a change in price will only affect movement on the curve. Similarly; input prices, technology, taxes, etc will cause shifts in the supply curve while only a change in the product price will cause movement along the curve.

Flash cards will help you understand the basic idea for each variable that affects the curves (i.e. technology, taxes, preferences, etc).

The equilibrium quantity and price is just where the two curves meet and people will be willing (and able) to buy a certain amount for a certain price. Be able to tell on a supply-demand chart if there is a surplus/excess supply or a shortage/excess demand.

Elasticities of Demand
This one could be tricky for some so first focus on the idea then try to get the basic formula. Elasticity of demand just says that people will buy less of a product if the price increases (duh!). The formula helps to quantify it by comparing the percentage change in demand against the percentage change in price, up or down.

Edemand = % change quantity / % change in price

Understand the difference between elastic and inelastic demand. Elastic demand is noted by a larger decrease in demand when price increases. Think luxury cars and jewelry, not necessarily needed things so when the price goes up, people buy fewer. In contrast to inelastic demand where demand does not change as much with price changes, think milk.

Profits and Costs of Production
All the cost curves are a pain so getting the ideas first will help make the graphs commonsense. Fixed costs are those that do not depend on quantity produced so things like rent, insurance, and equipment. Variable costs rise and fall with production, items like raw materials. The average fixed and variable costs are just divided by the number of products produced.

Since fixed costs do not change and variable costs increase at high rates of production, average total costs decrease at first but then rise later (a u-shaped curve).

Some other definitional terms are important as well like: operating leverage, marginal cost and marginal revenue.

Pricing
This is a fairly short section and the prior sections really cover the material. Understand the key factors that affect pricing: supply, demand, elasticity of demand and industry structure.

Industry Structure
Understand that Perfect Competition, Monopolistic Competition, Oligopoly, and Pure Monopoly lie on a scale with the key differences in number of firms, barriers to entry and exit, competition between firms, and profits.

In perfect competition, there is high competition and low barriers to entry/exit. This results in firms taking the price that buyers are willing to pay and profits equal to opportunity costs in the long-run.

In pure monopoly, there is just one seller and high barriers to entry so the firm sets the price in the market (profits are high due to pricing power).

In an oligopoly, there are a few sellers and barriers to entry/exit are high. As the next structure from monopoly, there will be a lot of similarities with the key differences being number of firms and limited increased competition.

We’ll cover chapter 7, macro-economics in the next review. The jury is out whether macro-economics is more or less interesting than micro-economics. I enjoy it more because it is broader concepts that seem to matter more on the big picture but many prefer micro- for its relevance to actual company operations. Remember, getting the basic ideas within each section will make it easier to grasp the details and thinking of the material in practical terms might make it more interesting.

‘til next time, happy studyin’
Joseph Hogue, CFA

 

The Do’s and Don’ts of using your CFA Charter



Before you tune out saying, “I already know what the Code and Standards say about using my charter,” this is not about how you should technically use the designation.

This post is all about getting the most out of your charter. You worked hard for it. Those 900 plus hours and three years should get you something, right?

1)     Do use the charter! I see a lot of people on the internet and have talked with people at conferences who you would never know they were a charterholder. Now I am not saying you monogram all your shirts with CFA, but it should go on your professional nameplates (i.e. business cards, professional social media profiles, nametags at conferences). Presumably you wanted something more from the designation than just the knowledge you got from the curriculum. It’s going to be hard to reap those benefits unless you let people know.

2)     Don’t be a CFA-ist. I’ve seen this before and came close to doing it myself. You are talking with a group at a conference or professional event and the conversation comes around to designations and qualifications. Naturally you want to talk up the grueling study needed to pass the CFA exams, so you gush about how it is so much harder than other designations and it is the only real investment-related qualification. That’s when you find out that several people in the group have other designations (i.e. CFP, CPA, etc). Then you find out they know a lot more than you and have more distinguished careers.

There is some overlap in the markets for the designations but mostly they serve different purposes. Feel free to talk up the charter but understand that the measure of a designation’s worth is what you do with it, not by just having it.

3)     Do take advantage of ALL the benefits. When is the last time you went to a local CFA society event? When was the last time you logged into the Institute’s website and looked around, maybe looking at some of the published research? Clawing your way through the exams and paying your membership dues (yes, along with signing your annual ethics statement) provides you with a range of benefits well beyond just using those three little letters after your name. The charter puts you in a network of some of the best and brightest in the field.

I’m not saying that Bill Gross, CFA is going to start taking your calls but reach out to other charterholders in your network. The research published and available on the Institute’s website, combined with the insight from others all around the world, will make you a rockstar in your sector.

4)     Don’t forget the connections you made as a candidate. A lot of candidate groups form some great bonds while helping each other through the three-year war that is the CFA exams, then they go their separate ways into different sectors. Keep those friendships alive and help each other out.

There cannot be just four do’s and don’ts for using the CFA designation! What are your own musts for after you earn the charter? Any mistakes you’ve already made?

‘til next time, happy studyin’
Joseph Hogue, CFA

The Great CFA Problem Set Challenge



Each year, thousands of candidates take the CFA exams and I get a lot of emails from those with good outcomes and those with outcomes that were not so great. One thing always seems to separate the passing candidates from those in one of the fail bands, practice problems.

Now it felt like I did a million practice problems and problem sets every year that I took the exam but the average I get from most passing candidates seems to be around 900 problems. Yes, of the candidates that tell me they passed, the average number of practice problems completed is around 900. Of those in the fail bands, it seems the average is just under 500 problems.

Not a formal study and probably some biases in the data (you tell me which ones), but there is definitely a difference. It doesn’t take any leap of imagination to figure it out. Practice makes perfect, right? 900 practice problems is about five full exams worth of problems. If you can do this many practice problems, learning from your mistakes, then you should have picked up enough to get more than two-thirds on the actual exam. Of course, learning from your mistakes is important. Sitting there getting 30% on each round of practice problems without reviewing the answers isn’t going to help anyone, but that’s another topic.

Your challenge for the next exam!
My challenge to you is this, for the next exam, do 1,440 practice problems. That’s about 8 full-length tests and more than 1.5 times the average number reported to me by successful candidates. It may seem like a lot but its still less than half the number of practice problems in the Finquiz Web-based Test Banks. For the first four, do not worry too much about your score. Do the practice problems and review any incorrect answers. Make sure you review the questions that you guessed correctly as well because you may not be as lucky the next time around.

After your first four exams, start keeping track of your overall score and your percentage score within each topic area. Plan out your study schedule so you finish the last set of practice problems approximately two weeks before the exam.

If you finish the last problems with an average score of at least 75% over the last 360 questions (2 full exams), then you can relax and just do some maintenance studying up to the exam. I hesitate to talk about an alternative because if you have finished more than 1,400 problems and are not scoring very well then a few more hundred problems are probably not going to help.

You will want to check your average scores in the individual topic areas. If you are scoring less than 60% in any one area then you’ll need to work on it regardless of your overall score, but after 1,440 practice problems I have gotta believe that you are going to be golden for the exam.

I can’t give you any guarantees but if I wanted just one way to assure myself that I would pass the exam, it would be the 1,440 challenge. For you December testers, that’s about 40 problems a day with a week left to the exam. For June testers, you could start in February and do just 96 problems a week.

You will need to do the readings or at least read the study guides to be able to work the practice problems but achieving your 1,440 should be the goal.

That’s it. Seems easier when you can focus on just one goal rather than trying to elaborate on a lengthy and intricate study plan. Work those practice problems, meet your goal and you will not be disappointed!

‘til next time, happy studyin’
Joseph Hogue, CFA