Your Essential Exam Day Preparation Kit

Every candidate needs an exam day preparation kit. This is a small folder of items you will need to take to the exam either as a requirement or that might help you through the day. I highly recommend putting this kit together today, rather than waiting until the morning of the exam. Sleep on the night before the exam is often hard to come by and you may be tired in the morning. Putting your kit together the day before helps to avoid forgetting something.

  • Admission Ticket (required) – This must be printed on clean, unused paper. Do not mark on your admission ticket, front or back! The information on your ticket must match the information on your passport. You will need your admission ticket for the morning and afternoon session, so do not lose it. I recommend printing out two copies, just in case.
  • Calculator (required) – Either a Texas Instruments BA II Plus or HP 12C. Your calculator will be inspected prior to the start of the exam and must remain on your desk at all times. The proctors will be walking around during the test and checking that all allowable items remain on the desk and in full view. You may have the calculator cover, keystroke card, screwdriver and batteries. If your calculator is less than a year old, you will probably not need to change the battery. If it is more than three years old, you may want to bring batteries just in case.
  • International Travel Passport (required) – A new requirement this year and I CAN GUARANTEE YOU that there will be candidates that show up without it and there will be candidates that spend much of the night before trying to find it. You must physically check your passport, just ‘knowing’ where it is sets you up for a frantic time of searching when it’s not where you thought. Also, physically check the expiration date, name, date of birth, passport number and country of issuance against information in the CFA Institute’s records.
  • Pencils and Pens (required) – For levels I and II, you will only need pencils. Level III candidates will need both pencils and pens (blue or black ink is fine). I recommend taking more extras than you will possibly need. It is not too inconvenient to carry around three extra but it would be decidedly inconvenient if something were to happen and you had nothing with which to write. This will also avoid having to bring a pencil sharpener, though you may still want to bring one.
  • Earplugs (optional) – I never needed these but have heard horror stories of industrial machinery outside and noisy proctors. If you are at all distracted by ambient noise, bring ear plugs. As with many of the optional items, it really isn’t that convenient to take them along.
  • Wristwatch (optional) – Some candidates like to keep a close eye on the time. Do not let it distract you too much though.
  • Aspirin, cough drops and tissues (optional) – You are going to be stressed the morning before the exam (as well as probably the week before) and this may play havoc with your immune system. Having some aspirin and tissues at hand is just a good idea. You do not need a splitting headache or cold to distract you from the test. This includes things like antacid, eye drops or anything else to delay any distractions until 5 pm. Be extremely careful taking any other medication (i.e. cold or flu) as it may make you drowsy or inhibit clear thinking.
  • Coffee or energy drink (optional) – If you normally use some kind of caffeinated or energy pick-me-up in the mornings, do not neglect this on exam day. Without that accustomed boost, you may feel drowsy and not be able to concentrate. Some candidates bring gum or candy as well for a little sugar boost. Don’t drink or eat more than you are accustomed because you do not want to need to use the restroom or be too jittery.

There will be an area outside the testing room will you will have to leave personal belongings not allowed in the exam room. These are usually monitored but the Institute will not be responsible for any lost or stolen items.

Even if you are not accustomed to eating breakfast in the mornings, try to eat something healthy and sufficient to get you through the day. Nothing too greasy or fatty but enough to give you the needed energy.

Good Luck Candidates!
Joseph Hogue, CFA

How to Pass the CFA Exams – A Basic Strategy

We have covered strategies and suggestions for level-specific studying in prior posts. Each level has its ‘core’ topics and should be approached in a way to maximize points. With around 50% of candidates failing any given level each year, you can’t afford to let easy points go by not studying as efficiently and effectively as possible.

Fortunately, there are also strategies and suggestions that will carry you through all three CFA exams. Some of these ideas are general ideas for effective studying while others are specific to the CFA curriculum and testing.

Start Early

The CFA Institute candidate survey shows that candidates spend, on average, around 300 hours of studying for each level. The average is fairly close for candidates that pass their exam and those failing. If even unsuccessful candidates are spending 300 hours studying, then you may want to plan on an extra 50-100 hours to be more confident going into the test. This may seem like an overly aggressive plan but it becomes much more manageable if spread over 4-5 months.

Do not plan on being able to stick to your study schedule perfectly. Most candidates with families and a full-time career will have a hard time finding more than 15 hours a week to consistently devote to studying. Things always seem to come up like an extra workload at work or family responsibilities.  There are approximately 22 weeks from the beginning of the year to the exam date. Starting in early January, if not before, should give you enough time to spread your study schedule out in a manageable way. *While this still only leaves about 330 hours at 15 hours per week, many candidates are also able to take a few days off to wrap up their study and augment total time.

Active Learning vs. Passive Learning

One of the hardest things to get through to candidates is the need for active learning techniques. A previous post detailed the effectiveness of active learning over passive. Studies show that active learning techniques are up to 2-3 times more effective for learning. Active learning is any technique where you need to engage in the curriculum, i.e. practice problems and talking about the topic.

Candidates should take advantage of provider test banks and the questions included in the Institute curriculum. The blue box and end-of-chapter questions in the curriculum are the closest in format and difficulty to those on the exams. Test banks provide are a great resource for testing your understanding of all or part of the curriculum and designing mock exams.

Beating Fear

It doesn’t matter how well prepared or how confident you are, there will come a time when you question your ability to pass or to continue with the tests. Understand that this is natural and something you need to work through. An aggressive and organized study schedule will help immensely in beating back the fear of failure. You have chosen a difficult path and put yourself ahead of others in your profession, keep that drive and press on through the exams.

Below is a list of suggestions from a previous post for beating fear and those voices in your head that keep you from accomplishing your goals.

  • Surround yourself with a strong support system- Let your friends and family know how difficult the exams are and how important they are to you. When times get tough, their encouragement will help guide you.
  • Stay active in study groups and forums- Surrounding yourself with others working toward the same goal helps immensely. There’s strength in numbers!
  • Start early- Poor preparation and not having a plan is the quickest way to self doubt. Write down a rigorous study program and stick to it, leaving yourself time for those what-if scenarios.
  • Repetition- Knowing that you’ve been through the material a couple of times and can summarize the important points will boost your confidence. While this might be tough to do with the entire curriculum, there are options for condensed versions. FinQuiz offers both a curriculum-based study guide and topic summaries to help you move through the material multiple times and grasp the important stuff.

Keeping it Interesting

The curriculum is a compilation of academic and practical research in the field of investment analysis and asset management. Even condensed study guides can exceed 2000+ pages of material for each level. Some of the material can be extremely dry and monotonous.  To be successful on the exams, you need to cover the curriculum multiple times. A prime hurdle will be avoiding burnout and boredom with your study and the readings.

To avoid burnout and boredom, you need to keep the material and your studying fresh by utilizing different resources and media. Using videos, flash cards, and talking with other candidates is a great supplement to the core resource of Institute curriculum and provider study guides.

Below is a list of different media and resources to keep your exam preparation fresh.

  • Videos- Great for visual and kinesthetic learners, and a relatively quick way to get through the curriculum in a different medium but is inefficient passive learning
  • Study Groups- Good use of active learning and can provide a good support system, but can be slow and misinformation is possibility
  • Reading curriculum- Straight from the horse’s mouth, EVERYTHING on the exams will be here but the books may be better for building muscles than building exam scores
  • Reading 3rd party condensed study notes– My core mode of study. I went through condensed notes at least three times at each level but these are also passive learning so you need to supplement with active learning
  • Practice problems & mock exams- Second most useful method of studying for me. You need to read through curriculum/study notes to get a feel for the material but only practice problems and question banks will work it into your head and convert to long-term memory
  • Flash cards- These are really an extension of practice problems but are more portable and more easily focused

Practice Problems and Mock Exams

This relates to the idea of active learning mentioned earlier. You will have no idea of your level of preparation until you start practice problems and testing your level of retention. At minimum, you should do a set (20 questions) of problems immediately after reading a study session. Then, complete another set of questions the next day. This will help learn the material studied and then cement it into your memory by reminding yourself. Always read the guideline answer for those questions you missed.

Mock exams, created from provider test banks, are an indispensible way to prepare for the exams. These can be half (3 hour) or full (6 hour) exams constructed from test bank questions in the topic weightings given by the Institute. You should plan on doing at least six full exams to get a good idea of where you need to guide your study time and your overall preparation for the exam. We know that no candidate with a score of 70% has ever failed the exam, so you should be aiming for something above this. I would aim for +80% in the core topics for the exams (Ethics, FRA, Equity, Fixed Income) while looking for at least 70-75% in the other topics. Beginning these mock exams around 7-8 weeks before the exam will allow you to shift your study focus and target weaknesses.

Core Topics

Ethical and Professional Standards is arguably the most important section of the three exams. Many candidates underestimate the topic because they think the questions will be intuitive and simple. Unfortunately, it is not as simple as merely don’t lie, cheat, or steal. First, concentrate on learning the basic idea behind each standard then do the problems in the curriculum multiple times. You need to get comfortable with the Institute’s reasoning and these questions are the best way to do it. The material here does not change much year-to-year or through levels, so spending more time on the first exam will make the second and third exams easier.

Financial Reporting and Analysis is another core topic worth around 20% of each of the first two exams. Much of the curriculum is built around a solid understanding of the three financial statements and analysis of how the 10-Q and 10-K presents a company’s performance. Understand how each line-item on the statements can be manipulated by management and how the statements are related. Again, spending extra time while studying for the first exam will build a strong understanding that can make the other two exams easier.

Equity Investments is also a core topic, more so at Level II but also worth around ten percent of the other two exams. The material is more quantitatively focused than other topics but the math involved is fairly basic. The area lends itself well to practice problems to better focus on the formulas required. Understanding the various inputs to the formulas, what they show and how they are related to analyze performance and valuation will get you many of the exam questions covering conceptual ideas.

Fixed Income is of slightly less importance than the material on equity investments, but still can be considered a core topic worth around 10% of each exam. The material is a mix of conceptual and quantitative, so you will need to divide your time for both. Understand the basics of debt instruments and how they are used in corporate finance and as an investment. Many candidates neglect the topic because they are less familiar with fixed income relative to equity investments.

Conceptual Topics

Corporate Finance and Economics are largely conceptual topic areas. These are sort of in-between in importance because while they do not offer as many points it is fairly easy material to pick up. Understand the basic reasoning behind financial decisions at the corporate and macroeconomic levels and you shouldn’t have a problem.

Portfolio Management is not as important at the first level but then builds in weight until being the focus of the Level III exam. Understanding the basic ideas of risk and return measurement for the first exam will prepare you for some of the more detailed theory in the second exam. You will need to spend a considerable amount of time writing out Investor Policy Statements (IPS) for the Level III exam.

Alternative Investments, though a little more quantitatively intense at the second level, is tested at a conceptual level for most of the exams. Understand the difference in return expectations, liquidity, risk and other characteristics between these alternative investments and other asset classes.

Formula Frenzy

You will be required to learn and use an immense amount of quantitative information and formulas to pass the exams, especially at the second level. Most formulas will be fairly basic in mathematical difficulty while others will be harder and include several steps.

Practice problems and repetition are the most obvious way to handle the equations on the exams. There really is no substitute for hard work, so do not neglect this resource. You should first try to understand the inputs and relationships within the formula and what it is trying to show. This will help to memorize the formula and will get you any points questioning the concept behind the idea.

Flash cards are a good resource for handling the more difficult formulas because they are portable and can be used quickly. While many providers sell flash card sets, building your own will give you additional practice writing out the material. Always write out flash cards as word problems instead of simply a list of inputs. This will more closely match the questions on the exam and help you understand where to find necessary data for an equation.

No Shortcuts

All the tips, tricks and strategies in the world won’t save a lazy candidate. Passing the CFA exams takes a great amount of commitment and drive but it comes with a greater amount of satisfaction and reward. This blog can help put you on the right path and guide you through the exams, but you will still need to do the work. Stay strong, find your motivation and earn your charter!

Good Luck and happy studying!
Joseph Hogue, CFA

An Overlooked Benefit of the CFA

I am proctoring a mock exam as I write this and see one of the often overlooked and underappreciated aspects of the CFA. These exams are truly the great equalizer!

Some of the candidates pulled up in BMWs and Lexus, pulling off their designer sunglasses before entering the building. Others pulled into the parking lot in things that may once have been considered cars, but are now a loose compilation of spare parts. Whatever your economic situation in life, you can’t BUY the charter.

While it doesn’t hurt to have a fair amount of brains, I’ve seen the brightest and most adept students fail the exam. I’ve also seen people pass the exam who I was surprised could figure out how to walk and chew gum at the same time. There are no free rides on the exam because of your natural intellect. It is a tough 18 hours of testing and everyone needs to put in the time studying. As long as you treat the curriculum with respect and work hard, you will earn your charter.

I consider myself a pretty lucky guy. I was not born wealthy and I don’t have a Clooney-esque chin, but I was born in a country with a high standard of living and enough opportunities that most people take them for granted. Others are not as fortunate, having to face political, social, or economic hardship on a daily basis. The CFA exams do not care about this. My citizenship or relative ease of life does not put me on the ‘short-list’ of charterholders. The only bouncer at the velvet-roped door of the CFA is the exams, and he’ll only let you through with a passing score!

Having those three little letters after your name will not ensure an easy life for the rest of your career. You may even find yourself working longer hours because of a higher level of responsibility. The charter is not like winning a lottery ticket, you will still have to work for your money. What you will get from the charter however is the knowledge that you accomplished something that very few are able to do, less than one percent of all financial professionals, and that you did it on a fair and even playing field. You will know that your hard work and perseverance, more than anything else in life, earned the charter and that no one can take it away (given you conduct yourself in an ethical manner and maintain dues/conduct statement each year).

Above all the injustice, unfairness and just plain crap luck in life there is one thing that is fair. It cannot be won or bought and you cannot talk yourself into its graces. It is the great equalizer for financial professionals. Good luck on your CFA exams!

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

Mock Exam Madness

Mock exam scores (the ones I have seen for various providers) are starting to come in and it looks like candidates are about as prepared as they have been in prior years. Difficulty varies on these, but it looks like candidates are coming in at around 60% overall.

What does this tell you? Not much actually. I have been a big proponent of taking mock exams as part of a guidance tool for your own studying. After taking a few exams, you can get a better sense for the topics in which you need more work. Consistently taking exams as part of your study routine can help to make sure you are not neglecting a topic or as a way to fine-tune your time. Comparing your score against the average scores for all candidates, just does not provide much new information.

We already know that no candidate with a score of 70% or above has ever failed the exam. Other than that, the Institute is pretty quiet on the issue. We also know the pass rates and trend for each of the exams, around 40% for the last five years or so. Knowing that candidates are averaging around 60% on mock exams really only tells us that the actual passing score will probably be somewhere between 61-69%, which we could have assumed anyway.

The mock exams are a great tool to test yourself in the testing environment. Unfortunately, many candidates choose to only complete one mock and then dwell on their score. If you do not understand how a sample size of one is not a good idea, you need to go back and check your quantitative methods. Scoring extremely well or poorly on one mock exam says little about your level of preparedness. Don’t neglect to study for the next month if you blew the mock away. Similarly, don’t get too discouraged if you did not do well. Take a few more mock exams and average out your scores by topic. This will show a better estimate of your understanding.

Mock exams are also a good idea because it forces candidates to do problems in multiple topics in one sitting. While doing topic specific practice problems after each reading is important, you need to do problems across different topics to better simulate the difficulty of the actual exam. The exam will require that you remember all topics in one sitting, so you should spend some of your study time practicing this.

You get one mock exam from the CFA Institute free as part of your registration. FinQuiz also has six full-length exams available. This, combined with the end-of-chapter and test bank questions should be enough to give you a good idea of where you stand come June 23rd.

Just 5 weeks left. Stop surfing the internet and get back to studying!
‘til next time, happy studyin’
Joseph Hogue, CFA

Last updated: May 19, 2018 at 15:05 pm

Will the CFA Charter Get Me a Job???

This is probably the question I see most often from candidates. The CFA exams can be extremely demanding and candidates want to know that their efforts will be rewarded.

There are two problems with the question though. First, it always seems to get asked most in the months leading up to the exam. It isn’t a legitimate question as much as it is fear of failure trying to give you a reason to give up, something I addressed in detail in a prior post. Ask yourself if you are dedicated enough for the exams before you begin level 1 (and at latest maybe before level 2 now that you know what you are up against), then stick to your decision.

Before I address the second problem with the question, we’ll cut to the answer. For those of you looking for a silver bullet in landing a job, the CFA designation alone will not get you a job. But then there are few things, when considered alone, that will get you that offer letter (short of marrying the boss’ daughter).  Even those with advanced degrees are looking at a 3.3% unemployment rate. You still need to use a comprehensive strategy to get that job (networking, education, experience). Will the CFA designation help to land an interview, yes! Will the designation help you stand out in a foot-deep stack of resumes, yes! Will it help you understand the industry/investment management so you can rock out on your interview, definitely!

Now that we know that it is a trick question, the second problem is that it really doesn’t matter. The designation isn’t about just getting a job. It is about making you the best (analyst, portfolio manager, advisor, etc) and being able to compete in an industry where people bite and claw for 50 basis points above the benchmark. If you are just looking for a ‘job’, there are easier ways than spending upwards of 1200 hours studying over 3+ years for just three little letters after your name.

If you are looking for a way to become a world-class professional in the field of asset management and analysis, then the Chartered Financial Analyst curriculum is second to none. *I was going to end that sentence with, “then stop asking stupid questions and get to studying,” but thought I would be nice for a change.

I could wrap this up with all kinds of clichés or analogies like, “the road less traveled,” but I’ll spare both of us. The golden gates will not open up on the day you get your charter nor will Bill Gross call and welcome you to the club, begging you to work for his fund. The charter is about placing a premium on your expertise and the value you can bring to your clients and employer, so in that respect…yeah maybe it will get you a job.

‘til next time. Happy studyin’
Joseph Hogue, CFA

CFA Level II Market-Based Valuation

The material here is fairly straight forward and easy points if you focus on the concepts and a few key formulas. The section is large enough and within an important topic area (Equity) that you can count on getting a few questions on the exam.

Be sure you know the advantages and disadvantages of each market multiple method as well as the general concepts behind the measures. We’ll cover these in today’s post. You must understand the Gordon Growth Model and be able to move things around to find different variables. Finally, Free-cash-flow-to-equity (FCFE) and Enterprise Value are fairly important formulas, of which we’ll cover on Friday.

Advantages and Disadvantages of Market Multiples

  • Relative value is relevant when picking stocks despite general market mood – despite the general trend in the market, there will still be over- and under-valued assets which can be found using relative valuation measures.
  • Easy to compute and understand – These measures (P/E, P/B, E/P) are some of the most widely used metrics. The math is easy to compute and the concept is intuitive. There is a risk that these measures are overly simplistic though.
  • May be difficult to compare companies across multiples without significant adjustments – Companies in different sectors and industries may vary greatly in their fundamentals, i.e. debt burden, payout ratio, growth and margin characteristics. This makes it inappropriate to compare many companies directly without some kind of adjustment.
  • Biggest disadvantage is multiples build in systematic errors- Even if one stock is extremely under-valued compared to another, if the general market or the sector is in an over-valued state then the asset may not truly be a good investment.

Comparables versus Forecasted Fundamentals

The material covers two forms of market-based valuation, comparables and forecasted fundamentals.

  • Comparables are relative value measures where a benchmark value is created through analysis or averaging usually the sector or industry average. This is then used to compare equities within that sector to determine relative over- or under-valuation.
  • Comparables provide an objective guide for valuation but provide no information on
  • Forecasted fundamentals use financial statement data (payout ratio, ROE, earnings, etc.) to find either a present value or future forecast of the asset price, most often cited in the curriculum is discounted cash flows (DCF). This tries to explain the ‘why’ in valuation.

Price to Earnings (P/E)

Price-Earnings is most often quoted on ‘trailing’ earnings or those over the last 12 months but can also be quoted on ‘leading’ earnings, those over the next 12 months, or a combination. Trailing earnings are more widely used and not subjective to forecasting errors but leading earnings should be used if the analyst expects a regime change in earnings.

With the P/E ratio, we can see the relationship between required return, growth, and the retention rate.  You need to be able to understand the relationships in this formula and be able to change things around to solve for different variables.

Advantages/Disadvantages of P/E

  • Simple and widely understood
  • Intuitive since investment value is derived from corporate earnings
  • Negative earnings will cause an error
  • Earnings can be volatile or transitory, making the measurement inconsistent
  • The biggest disadvantage is management’s incentive to manipulate earnings

Analysts may want to ‘normalize’ earnings by taking the average over an entire business cycle. This helps to reduce the short-term effects of business cycle changes on different industries. The curriculum discusses two ways to do this, the historical method and ROE method. Historical, is just the simple average of earnings over the cycle. The ROE method involves averaging the firm’s ROE over the cycle then multiplying by the current book value per share.

One important piece of vocabulary that often confuses candidates is the ‘justified’ P/E. This is simply the P/E based on forecasted fundamentals as follows:

Notice, it is the P/E that should result given the forecasted earnings and the company’s payout ratio.


Earnings Yield

The earnings yield is just the inverse of the P/E (Earnings divided by Price, E/P). The measurement will yield the same meaning as P/E but is useful when earnings are negative.

Price to Book Value (P/B)

Analysts are generally skeptical of income statement metrics because of the ease and incentive for manipulating earnings. Price to Book uses the Gordon Growth Model and incorporates book value in the following formula:

Remember, book value is total assets minus total liabilities and preferred equity then divided by common shares to get book value per share. You may need to adjust some balance sheet accounts because of different practices across firms.


  • intangible assets- patents should be included but goodwill not
  • assets usually carried at historical and should be marked to fair value
  • adjustments for off balance sheet items
  • LIFO vs FIFO adjustments and depreciation


  • Book value is more stable than earnings
  • Book value more appropriate for highly liquid companies (insurance, banking)
  • May be inappropriate to compare book values across industries because of differences in fundamentals

Price to Sales (P/S)

The final relative price multiple is price-to-sales, using net sales divided by number of shares. The main advantage here is that sales, or revenue, is less easily manipulated than earnings and always positive though revenue recognition practices can still distort the outcome. The main disadvantage is that P/S is often used to justify valuation based on expectations of future earnings profitability even when current earnings are negative. This happened in the years leading up to the dot-com bust. Analysts used P/S and inflated sales projections to value equities that would never live up to the high expectations and eventually crumbled as investors saw that the companies would not eventually be profitable.

Remember, this is just a quick review of the core concepts and formulas for the material. You need to actively study the study guide and question bank software to make sure you get this stuff down. Again, fairly straight forward material but no less important because it has a good chance of showing up on the exam.

happy studyin’

Joseph Hogue, CFA

This Person Will Keep you from Passing the CFA Exams

Your greatest hurdle preparing for the CFA exams is not going to be your new job, your newborn that wants 100% of your attention, or giving up any semblance of a social life. As cliche as it may be, your biggest challenge for passing the exams is YOU.

You are going to get in the way of earning the charter by being lazy and by letting fear keep you from doing what needs to be done.

Did He Just Call Me Lazy??
By lazy I don’t mean everyone is slothful vagrants, sitting around doing nothing. I mean that it is easy to lose focus and your commitment to the process. We’ve already talked about the effectiveness of active learning and doing practice problems but many will still choose  the easy route of simply reading through the curriculum or watching a few videos on the topics.  I know because I caught myself doing it every year and had to make myself take the harder route. It’s much easier to relax during the week and ‘plan’ on studying over the weekend.

We’ll talk more about ways to keep your focus in future posts. For now, just remember three years is a miniscule amount of time compared to the big picture. You’ve already chosen the road less traveled, now stick with it and push through to your reward. It’s a tough choice and will get tougher, but it is all worth it!

Stepping on Your own Foot
The subject here is letting your fear keep you from succeeding. Over the three years of studying for the CFA exams, I spent hours on internet forums or wondering to myself if it was worth it to pursue the designation. I’m a fairly confident man and aware of my abilities but every once in a while that self-doubt would creep in and make me question whether to continue. Fortunately, what I discovered early is that this is just my mind playing tricks on me. It’s a tough process and the fear of failure is going to try to keep you down. The cruel irony is that if candidates spent the time studying instead of worrying and searching for ‘is it worth it’ type questions, more would pass the exams.

The important thing is to recognize when this self-doubt is happening. It won’t always come in the form of fear about your preparedness but could be thoughts like:

  • Is the CFA designation even worth the trouble?
  • When am I ever going to use… (fill in the blank: bond pricing, Black-Scholes, APT, etc.)
  • It’s too late this year, I’ll get to it next year.
  • I’m too old for the charter.

I’m not saying that pursuing the Chartered Financial Analyst designation is an easy decision or that everyone should do it, but you need to understand the difference between objectively analyzing the cost-benefit of the charter versus fear and self-doubt holding you back. Just understand that these questions are not legitimate reasons for not finishing but just fear manifesting itself.  Make the decision to pass the exams and collect your charter, then do not let anything stand in your way!

A few suggestions to wrap it up:

  • Surround yourself with a strong support system- Let your friends and family know how difficult the exams are and how important they are to you. When times get tough, their encouragement will help guide you.
  • Stay active in study groups and forums- Surrounding yourself with others working toward the same goal helps immensely. There’s strength in numbers!
  • Start early- Poor preparation and not having a plan is the quickest way to self doubt. Write down a rigorous study program and stick to it, leaving yourself time for those what-if scenarios.
  • Repetition- Knowing that you’ve been through the material a couple of times and can summarize the important points will boost your confidence. While this might be tough to do with the entire curriculum, there are options for condensed versions. FinQuiz offers both a curriculum-based study guide and topic summaries to help you move through the material multiple times and grasp the important stuff.

All for today. As always, I look forward to seeing your comments, suggestions, gripes and grievances.

Joe Hogue, CFA

As an added bonus for reading through my ramblings, I thought the quote below was especially relevant. Any time you can fit in a quote from Rocky has gotta be a good day!

“Your best friend is a guy named Frankie Fear. You see Fear is a fighters best friend you know, it aint nothin to be ashamed of, you see Fear keeps you sharp, it keeps you awake you know what I mean it makes you want to survive, you know what I mean. But the thing is you gotta learn how to control it alright, cause Fear is like this fire alright, and it’s burning deep inside, now if you control it, it’s gonna make you hot! Or if you see if this thing here controls you… it’s going to burn you and everything around you up!”
Rocky Balboa, Rocky V

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

Make Study Groups Fun with the CFA Trivial Pursuit Game

I’ve always had a mixed opinion on study groups for the CFA exams. They can be a great resource, breaking up the monotony of self-study and making the time more enjoyable. They can also be time-consuming between traveling and those tangent conversations too many groups fall into.

Talking to a candidate this week about working in a group, an idea occurred to me on how to really focus your study time and make the study session more fun.

Why not make a game out of it?

Introducing the CFA Trivial Pursuit Game

One of the biggest problems for study groups is that it is so easy for conversation to start on unrelated topics and to eat up your study time. By making a game of it, you have a goal to work to and may be able to stay focused.

The idea for the game is based on the board game Trivial Pursuit. In fact, you might want to grab the Trivial Pursuit game so you can use the board and the playing pieces.

In the game, each person gets an empty playing piece with six spots for the wedges. In the original game, the six pieces represent: geography, entertainment, history, arts & literature, science & nature and sports. In our CFA game, each of the wedges will represent three of the 18 study sessions.

The board is divided into colored spaces, with an equal number of spaces for each color. Players roll a die and move their piece around the board. The color of the space they land on will determine the study session for their question. Instead of trivial pursuit questions, you will need flashcards with questions from each study session in the curriculum. You will need at least 15 flash cards from each study session and more if you plan on playing multiple games. Players must answer a question from each of the three study sessions to collect a colored wedge.

Games of trivial pursuit can easily go about an hour with 30 questions or so during the game. You can play in teams or individually and the game is suited for as many players as are in your group. You can fine-tune the game with your own details like how to determine which of the three study sessions to choose when a candidate lands on each color. Play with one die instead of two so the game will last a little longer.

As with normal use of flash cards, work through the problem and make sure you discuss any incorrect answers.

I’m not calling up Milton Bradley just yet to sell the idea but I think it’s an interesting idea to build into your study plans. Studying for the CFA exams is too solitary at times and you need the interaction and support system you get with groups. By playing a CFA trivia game, you help to keep the group focused on studying and it sets a defined goal for the study period.

Try it out and let me know what you think.

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

Which topics usually show up on the CFA Level 3 Essay Section?

While I’m generally not one to recommend ‘gaming’ the CFA exams, knowing which topic areas and material has a better chance at showing up on the essay section of the Level 3 exam can help out big time. The afternoon section is worth just as many points and you still need to master all of the curriculum, but the morning section can make or break your day.

First, a disappointing experience in the morning can devastate your confidence and ruin your concentration during the afternoon. You need to go into the exam feeling like you’re going to pass and carry that optimism all the way through. Secondly, there are questions that are more suitable and do show up in the essays. Preparing for these through practicing old exams will put you way ahead anyone on test day.

Your first question on the exam will always be an individual portfolio management question. The individual management question is usually around 12% of the exam (44 points) and will either be a multi-period return or a single-period return. Within the question you’ll often see questions on taxes, investor behavior and estate planning but the core is built around the return objective, risk tolerance and the five constraints. We’ve covered a few of these in the past, linked here and here for review.

An institutional portfolio management question usually follows directly but last year it didn’t come until #6, but you will always see one. It is usually around 36 points (10% of the total exam) but ranges from 24 to 49 points. There’s really no way of knowing which institution type will show up but make sure you know the basic comparisons between them all for the IPS components. We’ve done a couple of past questions, linked here.

Practicing several (at least) old individual and institutional questions from past exams will make your day on that first Saturday of June. Imagine starting the exam being totally confident and easily completing the first two questions and knowing you’ve just aced about 20% of the exam!

Economics has been in the morning section in many of last years and has been worth an average of 11% of your morning score. Biases and sources of error in data is a popular topic along with one of the economic measurement tools  (tobin’s q, fed model, cobb douglas, h-model, yardeni ).

Risk management is often in the morning section, though it skipped last year. The question is usually about 10% of your morning score and often has a question about hedging with options, forwards, futures or swaps.

Asset allocation is another that usually shows up. The question is around 15 points (about 8% of your morning score) and will often be a selection of an appropriate portfolio or calculation of corner portfolios. The basic concepts, differences and advantages/disadvantages of the portfolio techniques is also something that has come up in the past.

Performance evaluation and the material on monitoring/rebalancing are also frequent essay questions. Each has had a question with an average of about 15-17 points. Make sure you can do a micro- and macro-attribution for performance evaluation as well as breaking total return down into its components. The buy/hold, constant mix, and cppi methods of rebalancing often show up as questions so make sure you spend some time there as well.

The material on fixed income and equity investments also frequently find themselves into an essay question though no specific formulas or processes jump out as regulars. Even if you receive a question in the morning section, the topics are a fairly large percent of your total score so you may get a question in the afternoon as well.

The material in alternative investments shows up only rarely, with a question on swaps and futures in 2009 (question #8).

‘happy studyin’
Joseph Hogue, CFA

Last updated: April 2, 2018 at 0:38 am

Five Reasons CFA Candidates Fail the CFA Exams (Part 5)

This post wraps up our five-part series on the most common hurdles facing candidates for the CFA designation. The first reason was too much time spent studying about studying, posted here. The second reason, planning a schedule around life and burnout, is a big one for those of us with a family and a full-time job. The difference between active and passive studying, is probably the biggest hurdle to success for most candidates. Last we looked at the myriad of resources available to candidates and using the right ones.

Today’s hurdle could just as easily have been titled, “I’m an ethical person, so why study ethics?” While the material on Ethics and Professional Standards is not the only one neglected by candidates, it is probably the most avoided. Sure, you need to have a good understanding of the entire curriculum but a look at the topic weights provided by the Institute makes it clear that some topics are a source of some major points.

Ethics, the easiest and most difficult topic on the exams

Candidates have a big opportunity with the ethics section though it still presents a problem for most. The topic area is tested at each level and is worth at least 10% of your exam points. The opportunity comes in the fact that the topic is the only one that really does not change much as you progress. You’ll see a couple of additional sections but these are relatively secondary against the core Code and Standards, which do not change. For candidates that give the topic its due at level I, the next two levels are that much easier.

The problem with the ethics material is twofold. Some candidates consider themselves to be fairly ethical people and so think that the answers on the exam will be intuitive. They neglect the topic and end up failing on the exam. Other candidates read the material, to the point of memorizing the Code and Standards, but neglect to do practice problems.

There are two types of ethics questions on the exam, those with no answer and those that seem to have two correct answers. You absolutely must practice the ethics problems provided by the Institute at the end of the chapters. You’ll be surprised by the level of ambiguity in some of the problems and how minute details can make the difference between one answer versus another. Don’t let the first time you are surprised by this be at the exam.

You need to know Financial Reporting & Analysis for the CFA designations??? Who Knew?

If not of equal importance to the ethics material, I would put FRA a close second. Unfortunately, a lot of candidates avoid this section as well. The material, much of it focused on accounting issues, may not be as interesting for some. It can also get extremely complicated and detailed on the level II exam.

Anyone that works in the industry, whether a charter holder or not, will tell you that understanding the financial statements is of the highest priority. As an analyst, you will need to develop models and an expert knowledge of how the company is reporting its business and how it all flows together. Spending extra time on the material will not only help you pass the exams, it will make your life so much simpler further down the road.

Equity and Fixed Income: The fun parts that aren’t so much fun anymore

Many candidates start the path to the charter because the love analyzing investments, whether in the equity or fixed income market. When they realize that it is a little more than just calculating the price-earnings ratio for the stock everyone is talking about… it becomes less fun.

The two topics can get extremely formula-intensive and most candidates only have experience in one of them. Avoid the temptation of only studying the topic in which you currently work or in which you think you want to work. First, you’ll need the points from each section to pass the exam. Also important though is the fact that you never know how your career will unfold or when you might want to work in another asset class.

Each level has its own idiosyncrasies and no one topic area will get you through every exam. The four topic areas above are extremely important but you still shouldn’t neglect the other five topics. Other posts on the blog talk about specific strategies for each level and can help you further focus your study plans.

Are there any hurdles to passing the exams that I forgot? What tripped you up the most? Let me know if you have any questions about the last five posts.

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

Last updated: March 26, 2018 at 21:23 pm

Five Reasons CFA Candidates Fail the CFA Exams (Part 4)

We’ve already been through three of our five reasons that keep candidates from passing the CFA exams. The first reason was too much time spent studying about studying, posted here. The second reason, planning a schedule around life and burnout, is a big one for those of us with a family and a full-time job. Last post, the difference between active and passive studying, is probably the biggest hurdle to success for most candidates.

Should I use a third-party prep provide for CFA Exam

Today’s post again deals with the planning process, not finding the right time to study but finding the right resources. The big question on the forums is always, “Should I use a third-party prep provider or just stick with the curriculum?” The question goes deeper though to different products and ways to look at the material as well. Disclaimer: Obviously, we here at FinQuiz have a vested interest in the answer. Our study guides have been developed as a great complement to the curriculum and we’re proud of the feedback we receive every year. That said, this blog is here for all candidates and we want to see you pass the exams regardless. Check out our examples on the homepage or contact us and we can talk about helping you get the most for your time.

Variety is the Spice of Life

Beyond the specific test prep provider, candidates also need to look at a variety of different products. The CFA curriculum at each level is in excess of thousands of pages. I was always a fan of looking at it from as many different angles as possible. This helped to break-up the monotony and took advantage of the strengths within different media.

CFA Study Guides – two formats

Study guides come in two formats, those based on the specific Learning Outcome Statements and those that are curriculum-based. Some providers reason that structuring the guides on the specific LOS makes it easier to package the material in shorter pieces. FinQuiz has taken a different approach, developing curriculum-based guides as a complement to the curriculum instead of as a substitute. By following the curriculum, the guides are more condensed and focus on those areas that give candidates the most problems.

Some candidates completely ignore the curriculum, opting instead to only read study guides. Granted, this cuts down on the time spent to get through the material but you are sure to miss some points. As condensed notes, the study guides are not going to include 100% of the testable material in the curriculum. If the guide only hits 90% of the material and the candidate only retains 80% of the guide, then their score is already maxed out at 72%. This is why FinQuiz feels that a complement to the curriculum is more appropriate than a substitute.

Flash Cards for the CFA Exam

Flash Cards are the most appropriate for focusing in on those last remaining areas in which you are having trouble or keeping those important formulas and processes fresh in your mind. I also like flash cards for their portability and ease of use during short periods. We get (2) fifteen minute breaks during the day, not really enough to open up the books and start a new section but plenty of time to go through 10 cards.

You can easily buy or borrow cards off the internet. Most providers sell sets for around $125-$175 or someone in your social network probably has some you could copy. The best way, though, is to make your own cards. It may take a little longer, but they will be customized for your learning and will provide the opportunity to write out the material.

CFA Exam Videos

Videos are a good way to look at the material from a different format. The majority of your studying is going to be through reading a section and answering problems so it is nice to take a break every once in a while and have someone explain the curriculum to you. This is especially useful for some of the more complicated sections where a live example might help. While FinQuiz does not yet offer videos, there are many available on YouTube and can be found through a simple search.

CFA Exam Test banks

Test banks include thousands of problems to work through and are a great complement to those in the official curriculum. Working practice problems are really where you need to be focusing your time because the retention is so much better using this active learning method than simply reading the material. Candidates need to work through all the end-of-chapter questions and ‘blue-box’ examples within the curriculum. This is going to be the closest to the style and difficulty that you’ll see in the exams. The few hundred problems included in the curriculum really isn’t enough to prepare for the exams, making test banks absolutely necessary.

When working through a set of questions, don’t just score your results at the end of a study session. Go back through the questions. Figure out why you missed those incorrect answers and make sure the correct answers were from an understanding of the material and not simply a lucky guess.

Practice Exams for CFA

Mock Exams need to be a part of your study program so you are not surprised by the six-hour testing marathon in June. Many candidates handle their studying exclusively in short, one-hour chunks then do poorly on the exam because they are not prepared for the level of mental fatigue. Further, mock exams force you to answer problems across the curriculum instead of only looking at specific sections. Facing a test of the entire curriculum is much different than looking at each section immediately after reading over the topic area, make sure you are prepared.

Too many candidates rely solely on the official CFA curriculum without taking advantage of other available media and resources. Besides offering different approaches and advantages specific to each media, using different resources are about the best way possible of avoiding burnout while studying for the CFA exams. Look through the free examples that many third-party providers offer or ask other candidates which provider they used. The incremental costs to using a few products are well worth the expense to avoid having to retake the exam.

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

Last updated: March 26, 2018 at 21:22 pm

Five Reasons CFA Candidates Fail the CFA Exams (Part 3)

Frequent readers of the blog will recognize this common hurdle that candidates face. It is a problem all students face. Worst of all, it is not something you can overcome once and not worry about it again. You have to continuously watch for it to keep yourself on course.

The number one reason candidates do not pass the CFA exams is the difference between active and passive learning.

Passive learning is those activities where you do not participate but really just absorb the material through sensory perception. This includes reading, listening to a lecture or watching a video. Studies have shown that students remember only about 10% to 30% of the material through passive study.

Active learning, by contrast, is those activities where you engage the material in an interactive manner. This includes discussion, presentation and problem solving. Students are able to remember up to 90% of the material when they use active studying as part of their routine.

Just Reading the CFA Curriculum isn’t Going to Make It

Now that you know the difference, you are probably saying, “Oh crap, I am doing nothing but passive learning!” Don’t be too hard on yourself. Most school systems are built around passive learning (listening to lectures and reading textbooks) and students only grudgingly engage in active learning.

For me, it was only with the realization that the CFA exams were nowhere near as easy as most of my college curriculum and that passive learning was not going to cut it that I made the commitment to active learning. Its not the easier route, but would you rather spend a hundred hours reading to remember 10 hours of material (people typically remember about 10% of what they read) or would you rather work practice problems for about 11 hours to remember the same 10 hours worth of material?

Practice, Practice and yet more Practice for CFA Exam

1) Practice problems are the most obvious form of active learning. Make sure you do all the end-of-chapter questions and ‘blue-box’ examples in the CFA curriculum. These are going to be the most closely related to actual exam questions and are pretty close to the same level of difficulty.

The FinQuiz test bank includes almost 5,000 questions created directly from the curriculum and more than 500 item sets. It is a great supplement to the textbook questions and will help avoid boredom from doing the same questions multiple times.

Study groups for CFA Exam

2) Study groups are a good way to discuss and think about the material, but make sure you are efficiently spending your time on the curriculum and not talking about unrelated things that happened over the week. Flash cards are a good resource to use for study groups. You learn first by developing your own set of cards, then learn by working through other group member’s cards as well.

Level III candidates absolutely MUST work old essay questions.

3)  The Institute releases the last three years’ essay questions with guideline answers. We worked through about 12 of these before the exam this year and are available on the blog. Do not let the essay section surprise you. It can be extremely easy or extremely difficult.

I first wrote about active versus passive learning in a post earlier but thought I would include it in this ‘top 5’ list because it trips up so many candidates. Click here for more information on active learning and how it can help you remember 90% of what you study.

FinQuiz – Owned and operated by a team of CFA Charter holders.

‘Til next time, happy studying
Joseph Hogue, CFA

Last updated: March 26, 2018 at 21:20 pm

And you thought practicing FinQuiz Mocks was tough! - Copyrights

And you thought practicing FinQuiz Mocks was tough! – Copyrights

Five Reasons CFA Candidates Fail the CFA Exams (Part 2)

I used to know a First Sergeant in the Marine Corps, one of the hardest and most admired men I have ever known. First Sergeant had a saying for when someone failed or things didn’t quite work out, as if all failure came down to one motto, and it brings us to the second of five reasons why candidates fail the CFA exams.

“Prior proper planning prevents p*ss poor performance!” For those that do not know, ‘p*ss’ is an expletive used here as an adjective for how severely you just messed up.

Lack of planning may seem like an oversimplification as to why candidates fail the exams, but much of the time it is just that simple.

CFA Exam – 300 hours studying

Candidates know that it takes an average of 300 hours studying to learn the curriculum and pass any given level. That’s not just some number I pulled out of the air. Every year, the CFA Institute surveys candidates and every year those passing the exam report that they spent about 300 hours studying. For the most part, candidates understand the time required and most plan to put in the necessary time to pass.

They figure 300 hours divided by 3-4 months is about 20 hours per week studying and they plan on starting in late February for the June exam.

But that is about as far as their planning goes.

Life and CFA Exam

Then something happens I like to call, “LIFE.” Life is your little sister getting married and you have to fly to Albuquerque for the wedding. Life is first quarter reporting and you putting in 80 hours a week at the office to get client presentations done. Life is your son’s Little League Championship series that takes you to every baseball diamond in the state and out for pizza afterwards. Life is all the things that get in the way and cause you to deviate from your study plans.

Besides the little things in life that come up to detour the best made plans, I always planned ahead for those cabin fever moments. These are when you have been hitting the books every day for a month, when you have locked yourself away studying for so long that you see the efficient frontier in your sleep. These are the moments you need to step back and take a day or two off of studying or face some serious burnout.

When to start studying for CFA Exam

A lot of candidates and charter holders cringe when I tell them I started studying in November or earlier, more than seven months before the exam. When I say I started studying, they assume it was studying as they are used to doing when they start in February or March (studying every day for 15 hours a week until the exam).

When I say I ‘started’ so early, I mean a relaxed schedule of 5-10 hours a week for the first couple of months. Just reading through the curriculum but not worrying too much about problems or the exam. After the first reading, I would start through it again using study guides and working practice problems. This all gave me enough time to work through the curriculum and not worry about setbacks from ‘LIFE’ or burnout. I could take a week off if I needed to and still get back on schedule without drastically increasing study time.

There is a procedural component of your study planning as well, of which we’ll talk about tomorrow, but this time component is what trips up candidates the most. After all the time spent learning about the exams, after all the money spent on resources, it seems too simplistic that a lack of time is what causes candidates to fail but it’s true.

Learn to plan ahead and plan to pass the exams.
Thank you First Sergeant.

‘til next time, happy studying
Joseph Hogue, CFA

For the first part of the series and the problem of meta-studying, click here.

Last updated: March 26, 2018 at 21:17 pm

Five Reasons CFA Candidates Fail the CFA Exams (Part 1)

Today’s post starts a five-part series looking at the top five reasons candidates fail any particular level of the CFA exams.

Two things should be obvious here:

  • The list, as with the majority of posts, is subject to opinion and may vary across candidates. Besides working through the exams myself, I have spent a great deal of time talking with other candidates about the exams and their preparation. I like to think I know something about the process, but you always need to focus the material from your own viewpoint.
  • The list is composed of things that candidates do across all three levels that make it generally more difficult to pass. Each level has its own idiosyncrasies and hurdles that may also make it difficult. The habits listed in this series are not level-specific.

Which CFA exam level is the most difficult?

While understanding why each level is difficult and how to approach each in your preparation is important, the type of question brings us to our first reason candidates fail.


Candidates love to talk about the exams. They talk about which level is most difficult and why. They ponder the minimum passing score and trends in the pass rate. I have even seen forum posts on the best beverage to drink while studying. This is all meta-studying or [studying about studying].

Yes, you need to understand the topic weights on the exams. Yes, there are some great tips and tricks out there on how to approach the CFA exams. The problem is that candidates too easily use this meta-studying as an excuse to get out of actual studying. How many hours have you spent ‘researching’ how the tests are conducted, how to approach each topic area, the earliest one should start studying, or a myriad of other questions about the exams?

I have to be careful here. Your meta-studying is what brought you to the blog and I want you to come back regularly to listen to my ramblings. But I also want you to pass the exams and I have seen too many candidates sabotage themselves by spending too much time on the forums and not enough time actually studying.

Everything in Moderation

As with most habits, the first step is understanding the behavior and approach it with moderation. There is some great advice out there and it can make your life incredibly easier come the first Saturday of December/June. You need to know the general process involved and the idiosyncrasies within each exam, but you also need to know when to get off the forums and get to work studying.

Give yourself an hour or two every week to answer questions about the exams. You might take a little more during the first couple of weeks to familiarize yourself with a new level and you might take less time toward the end after you’ve learned what you need. The important point is to understand how much time you are spending and to make sure it does not come at the expense of studying.

  • If you have a specific question about the exams, especially while studying the curriculum, do not stop studying. Write the question down and address it later, after studying.
  • When looking for the answer to a specific question, try searching for the question using the forum’s search bar rather than making a new post. This will help answer the question quickly and will not bring you back to the post every time someone leaves a reply.
  • Find a couple of good sites (I hope this blog will be one) that you visit once or twice a week to see if there are any updates. Finding a new site can be helpful but don’t spend too much time surfing the web for new places to visit.

December and June will be here soon enough.
Good luck and happy studying
Joseph Hogue, CFA

Last updated: March 26, 2018 at 21:16 pm

Why I Sacrificed Three Years of My Life and am Glad I did!

The CFA exams are tough! No doubt about it. To pass the exams, you’re basically saying that you’re willing to work a part-time job for six months of each of the next three years…and you’re going to pay someone to do it.
Continue reading

CFA Curriculum Warning: Do Not Neglect

The actual length of the CFA curriculum varies a little each year but it’s generally between 2,500 and 3,200 pages. When you get the books in the mail, or receive the digital version, that may seem like a monstrous task. Over the three years of studying for the exams, I think my upper body strength grew just as much as my financial knowledge just from carrying the books around.

Study guides meant to substitute for the curriculum vary but generally range between 1,400 and 1,700 pages. At under two-thirds the length of the official curriculum, it seems like a no-brainer and I know many candidates who have only rarely even peaked inside their curriculum books.

And many of them are still candidates.

Do Not Neglect the Official CFA Curriculum!

Candidates that have tried to substitute the CFA curriculum with study guides have come to me afterwards with their horror stories. My reply is always the same, “I wish we had talked before because if you do the math then the answer is pretty obvious.” The minimum passing score for the exams is never released but I would guess it is around sixty-five percent. No candidate has failed with a score of 70% or better and I doubt if the Institute would want to charter someone that knows less than two-thirds of the subject matter.

Even the most gifted candidates are going to miss points. If about half the candidates fail the exam every year, I am guessing that most miss at least a tenth of the points and probably much more. We have no way of knowing but it’s obvious that you need every point you can get.

Now, I have seen pretty much all the study guides commercially available. There are some that do a pretty good job of condensing the material but none are able to get everything in a packet that is half the length of the curriculum. It’s impossible and information is going to get left out. Try to fit nearly 3,000 pages of information in less than 2,000 pages of notes and I would say you’re lucky if 20% of the information isn’t lost.

So if you neglect the official curriculum completely, you are already out something like 20% or more of the points. Now you need to remember at least 80% of the material just for a score of 64% on the exam.

Most of you have taken practice exams through test banks or the CFA Institute. How many have scored better than 80% on these? I know reading all those books is a daunting task but you just cannot afford to leave points on the table by neglecting the official curriculum.

CFA Study Guides

I don’t talk about the FinQuiz study notes much here on the blog other than to reference specific sections of the notes and the curriculum. I don’t want candidates to think I am being biased by pushing one particular study provider over another. But I can say, without any bias, that the FinQuiz notes have at least one big advantage over other study products, that they are meant to be used as a complement to the curriculum instead of a substitute.

The FinQuiz notes vary by length as well but are generally around 600 pages. It’s really the best of both worlds, you get 100% of the information from the curriculum and additional condensed explanations where you need them.

Free examples of the FinQuiz notes are available for download on the website. Take a look and compare them with the curriculum. FinQuiz regularly offers discounts on products and packages so you may want to contact the provider to get the best deal possible.

‘til next time, happy studying
Joseph Hogue, CFA

Last updated: March 23, 2018 at 0:16 am

A Secret about the CFA Curriculum that You Won’t Believe

There is a secret that many charterholders do not tell candidates. A secret so terrifying that most candidates probably wouldn’t believe it even if we told you.

After struggling through upwards of 9,000 pages of the curriculum over the course of three years, the truth is nearly impossible to fathom.

But even after more than 900 hours of study and countless study problems…
Many charterholders still read their curriculum.

Keep Your Curriculum Books!

Over the three years I studied for the CFA exams, I couldn’t stand the sight of my growing stack of curriculum books. The journey begins innocently enough with your Level 1 books. You may even be excited when that big box arrives in the mail.

But it doesn’t take long for that excitement to turn to despair and loathing as you toil through thousands of pages while your friends and family go out on the weekends.

Ok, so maybe I’m being a bit melodramatic but the fact is that most candidates avoid the CFA curriculum like the plague while studying for the exams. They rely on condensed study guides to get all their information for the exams. Sometimes it works, other times the candidate is left repeating exams because the study guides didn’t include all the detail needed to pass.

After the final Level 3 exam, the candidate breathes a huge sigh of relief and burns his curriculum books in effigy.

And then something odd happens. It happened to me and I can almost guarantee it will happen to you as well. I found myself referring back to the official curriculum in my professional career as an analyst. It starts like this, you will be looking at a company or sector and thinking how a fundamental difference in the group affects its valuation. Maybe the industry typically carries an especially high amount of goodwill on the books or maybe an accounting convention within the industry is different from other industries. It depends on where you work and the exact duties in your role but maybe you do not regularly account for that kind of detail in your analysis.

Then you remember, there was a whole section in the CFA curriculum about just such a practice! You scramble to the nearest library (because you burned your books, remember) to thumb through the curriculum. You read through the section and add it to your analysis.

This isn’t a wild story or something that will only happen to you on rare occasions. Your time spent studying for the CFA will commit to memory the basic idea of the readings even if you do not exactly remember the details. While your job as an analyst will involve going beyond the curriculum’s detail in some sections, there are some sections that you may not use or will only use broader estimates.

For example, while the curriculum goes into great depth and detail to adjust the financial statements in a number of different accounts (i.e. pensions, long-lived assets, inventories and intercorporate investments) you will likely not go into so much detail in your valuation models. That is not to say that your models will not be robust but maybe the level of detail just isn’t always needed. Until that day when you see a particular deal announced or a news release and think, “maybe this changes things and I need to look further into the details.” When you do look into the details, and it produces some real value for your firm, you will be generously rewarded.

The curriculum is your friend, you just don’t know it yet

I know it is tough to imagine how reading 3,000 pages of curriculum is a better option that relying on a 1,500 page study guide. You’ll just have to trust that all the time spent reading through the detail will pay off down the road.

This industry is full of highly intelligent and committed people. Every one of them has a cash flow model and has spent hours (more like years) studying how to analyze companies in their industry. You will only be able to compete if you can find the details that others miss. Reading the whole CFA curriculum when many candidates avoid it may just be your chance to uncover those details.

…and keep the books. It will save you a trip to the library later.

‘til next time, happy studying
Joseph Hogue, CFA

Last updated: March 21, 2018 at 23:00 pm

How NOT to be Surprised by the CFA Exams!

Less than half the candidates taking the CFA exams each year pass. It’s a statistic most of you know but never ceases to amaze me. How can an exam be so difficult that less than half pass each year?

You could blame the CFA Institute for making it so difficult and adjusting the minimum passing score but the fact that no one with an average of 70% has ever failed takes some of the blame off the Institute’s shoulders. Having to answer about two-thirds of the questions correctly doesn’t seem like too much to ask for a professional exam.

What if it’s something else? What if candidates just aren’t prepared for the exams? Spending upwards of 300 hours doesn’t seem like a lack of preparation to me so maybe candidates just aren’t preparing correctly for the CFA exams.

Each exam can be surprising for its own reason. This specific challenge in each exam catches candidates off guard and leads to a ridiculously-high rate of failure.

Learn what to expect on each CFA exam and how to study for it, and you’ll be better prepared than half the candidates already.

CFA Level 1 Exam: Information Overload

The first thing that surprises candidates on the CFA level 1 exam is the sheer amount of information they are expected to remember. Through undergraduate studies, most of you have been responsible for textbooks of information but you haven’t had to master all the material for one mammoth-size exam.

The CFA Institute doesn’t feed you the information in manageable chunks and then ask you focused questions every couple of weeks. The Institute turns on the firehose and drowns you in knowledge of which you’re supposed to drink every last drop.

Maybe the firehose analogy is a little extreme but it seems that way at times.

The trick to passing the CFA level 1 exam is that you don’t need to know every excruciating detail within the curriculum. Much more important is the basic ideas and concepts around each study session. Understanding the qualitative ideas in the curriculum is much more important than being an expert in one topic. This means reviewing every study session and getting a basic understanding across the entire curriculum.

Understanding the main ideas will help you immediately eliminate at least one potential answer for each question and should help you pick out the most appropriate answer.

It also helps to use multiple resources when studying for the CFA level 1 exam. Getting the curriculum from several different perspectives, i.e. official text, study notes, videos, flash cards and practice problems, helps to build repetition and memory.

CFA Level 2 Exam: A Quantitative Monster

After figuring out that the first exam is all about basics and qualitative information, the CFA Institute throws you a curve ball with the CFA level 2 exam.

The second CFA exam is all about formulas and quantitative detail!

While the CFA level 2 exam includes the same topic areas as the first exam, the topic weights clearly show a focus on three subjects. Financial Reporting & Analysis, Equity Investments and Fixed Income will account for up to 65% of your exam score and a large chunk of that is in quantitative calculations.

Top it off with the fact that you have a different format in the vignette questions, having to read through a story and then answer a set of questions.

Avoid being surprised by the quantitative material on the second exam through understanding the conceptual reasoning in the formulas and repetition.

Try memorizing every formula on the CFA level 2 exam and you could end up in an asylum for the criminally-insane. There are just too many letters, abbreviations and craziness. If WACC = (Vd/(Vd +Vce))rd (1-t) + (Vce/(Vd+Vce))rce) doesn’t make you go cross-eyed you are a stronger person than I am. Think about it intuitively and it makes sense.

The overall cost of a firm’s funding capital is the cost and proportion of equity and debt. The percentage of each funding type relative to the total is multiplied by its cost. Debt is tax advantaged, so you need the after-tax cost.

Understanding the conceptual reasoning behind each formula will help you recall it on the exam and you won’t drown in a sea of math.

The second trick really is no trick at all. You just have to work those practice problems over and over again. Use flash cards to write out the especially-difficult problems so you can review them several times a day until you’ve got it down. Work the end-of-chapter questions for each study session and use a question bank of problems if you’ve got one available.

CFA Level 3 Exam: Essays are a Physical, Emotional and Intellectual Challenge

Most CFA candidates understand that the essay section will be difficult but few realize how difficult it’s going to be until they’re half way through the morning session and sweating through their shirt.

The three-hour morning section of the CFA level 3 exam is a physical, emotional and intellectual challenge for which few really prepare well. It isn’t about just understanding the material, it’s about being able to construct your own answer and being physically able to write for three-hours straight.

There is really no better resource than the old exams provided by the CFA Institute. The Institute releases the last three years’ worth of morning essay questions on its website along with guideline answers.

  • Don’t just review these past morning sections, actively work them as if you were sitting for the exam. If you haven’t prepared the muscles in your hand to write for three hours when you arrive at the exam, you are going to regret it.
  • Learn how to bullet-point your responses to include all the relevant information. This will save you a ton of time on the exam. See how it’s done in the guideline responses.
  • When you’re writing out your answers on old exams, practice writing out your thought pattern. The CFA Institute awards partial credit for the essay portion but you have to demonstrate a certain point within the answer. Writing out your reasoning makes it more likely that you’ll hit on a few of those points and get the highest score possible.

Passing the CFA exams means being prepared for each exam and not being caught off guard by differences on each. Ask other candidates what surprised them most and understand how to study for each exam.

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

Last updated: March 19, 2018 at 0:35 am

How to Use Mock and Practice Exams to Pass the CFA Exams

There may be a confusion in semantics here, I use the term ‘practice exam’ to mean a graded test over more than one topic area but not necessarily over all topics or for the six-hour exam format. ‘Mock’ exams, however, are graded tests that incorporate all topic areas at the CFA Institute area weightings and with the full six-hour time window. The difference in definitions may be minimal, but it’s important.

You should be using practice exams throughout your studying to gauge your retention of the material. Mock exams are particularly important for two reasons:

  • Getting used to sitting down for six-hours and putting your brain through some tough mental gymnastics. Don’t underestimate this. Fatigue can be a big problem with the exams and I have heard candidates say that by the last couple of hours, they were just writing in anything to get it over.
  • Mock exams will help you follow your progress through each topic area, refining your study in each topic where you are weak. The level 1 and 2 CFA exams have clearly defined topic weights with some areas clearly the focus of the exams.

Six Times a Charm

About nine weeks out from the exam, I would clear my dance schedule for Saturdays from 9am-4pm. Each Saturday I would take my laptop to the library and complete a mock exam using a question bank. After the exam was done, the scores for overall and within each topic area went into a spreadsheet to track my progress week to week.

Going to a quiet (non-home) location and completing the mock exam is important for another reason, state-dependent learning. This is a peculiar little trick your brain plays. State-dependent learning is a concept where you are better able to recall information when placed in similar situations in which you learned the info. We won’t go into all the biology, but you should study and practice in a similar environment where you will be taking the test. This means no more curling up in bed with the curriculum while the tv hums in the background.

I usually ended up taking at least six of these mock exams. As each progressed, I could build a confidence band around the estimate for my percentage in each topic area. While you may struggle on a particular exam and see your percentage fall in a topic, your averaged scores will be more accurate and reliable (gotta love that Quant Methods section). We know that no candidate with a score of 70% has ever failed the exam, so you should be aiming for something above this. I would aim for +80% in the core topics for the level 1 or 2 exams (Ethics, FRA, Equity, Fixed Income) while looking for at least 70-75% in the other topics. If my average in any topic fell below that target any given week, I would review it the next week.

This is in addition to other studying I would be doing these last couple of months. Flash-cards are a great way to quickly work through the material and review. With the time left, you may not be able to work through the official curriculum but might be able to make another pass through condensed study guides or summaries.

Coming down to the wire, you really need to fine-tune your program to make sure you get max points on the exam.

‘Til next time. Happy studyin’

Joe Hogue, CFA

You’re Waiting for the CFA Exam Results? Why?

Waiting for the CFA exam results can be excruciating for candidates but it may not matter as much as you think

Candidates worldwide are now waiting anxiously for their CFA exam results from the December test. That’s tens of thousands of candidates biting their nails and pacing the floor waiting for the CFA Institute to grade their exam.

It helps to have gone into the exams with the confidence of passing but even the most self-assured candidates will have a tough time until results are released. The Institute gives itself up to 60 days to release Level I exam result.

It seems like an incredibly long time to wait given the stress around the exams and the work you put in studying…but does it really matter? Of course it would be great to pass the CFA exam but is there a bigger picture you’re overlooking?

The Zen Approach to the CFA Exams

Maybe it doesn’t help much if you’re sitting there wondering your fate for the next year. The low pass rate on the CFA exam means just about every candidate is going to have some doubt as to whether they’ll be spending another 300 hours before next June.

But if you think about the long-term and how much one year really matters within your entire career, it starts to look a little less significant. For many candidates without the necessary work requirements for the charter, you may have years before you can use the designation and passing the exams certainly won’t mean an end to long hours studying how to be a better analyst.

Passing the exam may seem like your top goal in life right now but which is more important, barely making it through to the next level or truly mastering the material? Many of you are probably thinking it’s much better to pass the exam now and worry about mastering the material later but taking one more year to really understand the profession isn’t that bad an idea.

Putting all this in perspective helps to handle a CFA fail as well. I’m not trying to jinx your results but historically half the candidates won’t pass their exam. Getting the bad news means telling everyone that wished you well and dealing with it every time someone asks you how it went.

Resist the urge to find an excuse to blame for not passing the exam. You just weren’t ready and there’s nothing wrong with having to retake the exam. You’re in good company with most candidates having to repeat at least one level of the CFA. Look at it as an opportunity to not only get a better understanding of the curriculum but to learn from whatever study habits held you back from passing. Not only will you be ready to take on the exam next year but you’ll have learned to pull yourself up from defeat and push yourself harder in the future.

Besides being much more relaxed about waiting for CFA exam results, taking the ‘no worries’ perspective of the exam can actually help you study and prepare for next year. If you’re less worried about scoring points and figuring out the tricks to passing the exam, you’ll be better prepared to just study and learn the curriculum. Instead of spending hours ‘studying’ about studying for the exam and trying to game the system, you’ll spend that time more efficiently mastering the curriculum and becoming a better financial professional. And that’s what it’s all about!

‘til next time, just relax!
Joseph Hogue, CFA

Last updated: January 4, 2018 at 7:47 am

Happy Holidays and a Prosperous 2018 from FinQuiz

Another year has passed and I just wanted to wish all of our readers Happy Holidays and a prosperous new year. We’ve been running the FinQuiz blog for nearly seven years now and the support from candidates has been amazing. Hundreds of thousands of candidates have clicked through to the FinQuiz blog and we’re looking forward to continuing that success with great CFA exam advice that will bring hundreds of thousands more to the blog over the next couple of years.

Our Community of Candidates is the Best Holiday Gift

Since 2012, more than 500,000 people have clicked through to the FinQuiz blog and viewed more than 1,600,000 pages of CFA study tips and curriculum notes. That loyal and regular support by candidates like yourself is the best holiday wish we could imagine.

Almost as great as the sheer number of candidates that have visited the blog has been the reach to all corners of the globe. The blog has been accessed from 201 countries from Albania to Zimbabwe.

The feedback from CFA candidates has been great and has really motivated me in our weekly blog posts. Not only have candidates shared their success on the exams but have also provided valuable feedback that helped us improve the notes and question bank.

“I managed to pass my Level 3 exam this round and the team at FinQuiz was instrumental to my success. Thanks to the wealth of questions available in your question bank, my item set scores are significantly better in this attempt. Joseph’s blogs are not only a source of inspiration, they also helped me in pacing the materials week by week.” Kah Juay Lee, CFA (Passed CFA Level III, 2013)

Of course, the blog is our way of communicating with candidates and putting out the most important information on the exams but it all is in support of our unique system of curriculum notes and exam prep packages. The unique system of notes rather than curriculum substitution has helped candidates beat the abysmal pass rate across the exams.

“Without the help of FinQuiz, I do not believe I would have scored >70% in 8 of 10 areas. FinQuiz tested the difficult areas that other question-banks will not cover. This boosted my confidence and clearly helped me on exam day.” David Young (Passed CFA Level II, 2010)

Upward for 2018

We’re not resting on our past successes. We have some great plans for 2018 and ideas for tips and products that will help every one of our candidates pass the CFA exam.

On the blog, you’ll find all the best advice and tricks to get the most points possible on the CFA exams. We’ve tried to make the blog relevant to candidates even beyond the exams with regular posts on career advice, networking and using the designation to the fullest.

We’re always here for you and love to hear from candidates. Send a note if you have any questions or comments and keep clicking through each week for more blog posts.

‘til next time, Happy Holidays!
Joseph Hogue, CFA

Last updated: January 4, 2018 at 6:00 am

When to start studying for CFA ?

Looking through forum posts and talking to a few candidates about timing and planning for the CFA exams provides some interesting stats and might help you assess how well your own preparation is going. The two core issues here are: when to start studying and exactly how much is enough studying.

When to Start studying for CFA Exam ?

It might be a little simplistic, but I see candidates starting their study plans in one of three categories: really early, about right, and what are you thinking! The actual dates started appear to follow a fairly normal distribution with the median around mid-February. I usually started with the ‘really early’ crowd between October and November, so I’m a little biased toward earlier rather than later.

While pre-January may be earlier than necessary, we see a lot of people waiting until March to begin studying. Biased I may be but 13 weeks to cram approximately 300 hours of studying seems a stretch. There will always be the intellectual giants out there (or at least those that think they are) that will have no problem learning all the material in three months. Then again, while actual pass-fail statistics are not available, I would put good money on the bet that the 50% of candidates in the fail band come disproportionately from these late starters.

Is it too late to begin studying for CFA Exam ?

Then there are always the (comical) posts in late April and through May asking for opinions whether it is too late to begin studying and still pass the exam. Most of the candidates I have met and talked to were fairly smart, but sometimes I’ve got to wonder.

Like I said, I am probably a little overcautious and biased to starting early. Most candidates have fairly relaxed schedules and can sacrifice a few extra hours for something that is undoubtedly going to change your career prospects and arguably your life (going out with that hot co-ed you met last week or keeping up with this season’s American Idol are not as important as you think). Nothing I could say would get most of you to start before January, but hopefully you will not wait until March.

How Much is Enough for CFA Exam ?

More important than when you start studying is (duh!) how much studying you do. Reading through forums and taking a few polls, I was surprised that the consensus is for reading through the material only once and then working through practice problems and a mock exam. At most, I found that candidates expect to read through study guides once then review a quarter to half of the material again. Most candidates planned on working through all the end-of-chapter questions and doing ‘some’ practice problems from a provider question bank.

Again, I might be a little conservative, but this seems entirely inadequate. Who are all these candidates with eidetic (photographic) memory that can pick everything up that easily? Practice exams taken through question banks will give you a good indication if you have picked up the material but most do not start taking these until late in the season. What happens when you take your first inclusive practice exam in May and find out you are not nearly as prepared as you thought?

The candidates that expressed a higher level of confidence with their preparation were mostly those that had read through all of the material at least twice and had started monitoring their progress through practice exams at least two months before the test date. This leaves time to focus on a few of the weaker topic areas as well as going through the material with a few other media (video, summary sheets, flash cards).

I guess it comes down to being realistic about your abilities and taking a rational look at the statistics. Surveys by CFA Institute show that candidates (both passing and otherwise) averaged around 300 hours of study time for each exam. We also know that approximately 50% of candidates fail the exam each year. This is one area where being ‘average’ is likely to not be enough.

I imagine that the absolute number of hours reported belies a fairly large distribution, but we’ll call it 200 hours minimum and maybe 400 maximum needed to pass the exams. Now think about your pre-CFA studying schedule. How many hours per week do you think you can realistically commit to studying? You need to plan conservatively if you are married, have children, or have a job with increasing workload around quarterly reporting. Life happens, don’t expect to be able to study as much as you would like every week.

‘til next time, happy studying
Joseph Hogue, CFA


Last updated: November 28, 2017 at 10:30 am


Using that Last Week Before the Exam

There are all kind of exam strategies floating around the web. Some are great, others not so much. As I’ve recommended in other posts, it’s usually more about what you feel comfortable with doing and what fits well with your learning style.

One recommendation I always ignored was to not do any studying the week before the exam. This one has different time periods associated (i.e. don’t study… the day before, the morning of, the whole week before, etc). While I usually took the day before the exam off, Friday was usually my day off anyway, I always hit the rest of the week before the exam extremely hard.

The last week before the exam was my ‘superman’ week. I would take the week off from work and go to my fortress of solitude each day for about 8-10 hours of studying. The CFA curriculum and test is your ‘job’ for that week and you should treat it as such. DO NOT STAY HOME! You really need to go a place where you will not be distracted and can concentrate for the full day. The library is the obvious choice if you can keep from people watching or taking time out to read the magazines.

I would start each day with a 3-hour exam using the topic weights. This would help to see in which topics I needed more studying. Within those areas where I was scoring around 80% or above, I would probably just review the topic summaries or review my flash cards quickly.

The rest of the day, I was focusing on those topic areas or specific points where I was not scoring as high.

My goal for the week was not necessarily to review the entire curriculum. You need to understand what parts of the curriculum are giving you trouble. Within each ‘problem’ topic, is it formulas or general concepts? Is it the amount of information or the depth?

My problem areas were usually the detailed formulas, especially within derivatives and fixed-income. I would review the material quickly if I felt there were any concepts I was missing, but most of the time I just needed to get the process for the calculations. Writing and reviewing detailed flash cards for the topic or formula always helped, so I would spend a couple hours on that. I would usually spend another 45 minutes going through question bank problems as well, reviewing the solutions to those I missed.

If I didn’t score better in the topic area the next day, or made the same mistakes, then I had to make the decision to hit the topic some more or write it off as ‘concept’ points. This is a tricky subject and we’ll go over it in another post. There are some areas or formulas where you are just not going to grasp even with a great deal of studying. For me it was swaptions and some of the other detailed derivative calculations. It may not make sense to spend three times the amount of study time on something that may or may not be worth a few points on the exam. For these areas, I made sure to understand the concept and enough of the calculation to make an educated guess among three choices.

Some will say that spending the week before the exam studying, or spending so much time studying, will lead to burnout before the exam. I always found that taking Friday off was more than enough time to relax and avoid burnout. I can understand the burnout fear but also realize that the time you are studying for the CFA exams is a miniscule period over your entire career. I think a lot of people ‘blame’ burnout for a simple lack of determination and heart. So you’re tired, so what, there will be plenty of time to relax after the exam.

That last week of studying always reminded me of the Crucible in Marine Corps recruit training, a 54-hour culmination of the three-month boot camp. Over the 2+ days, recruits push through sleep deprivation, hunger and over 40 miles of forced march before they earn the right to the title, United States Marine. That last week of studying is going to be hard, it will tax you mentally, but it will also get you those final points necessary and prepare you for the exam. Don’t pass up this opportunity to earn your CFA charter.

Good luck, and happy studyin’

Joseph Hogue, CFA