CFA or chartered financial analysts is a designation that is highly respected in the field of investment and portfolio management.  It is recognized by the American based CFA institute which was earlier known as Association for Investment Management and Research.

Cracking CFA exam is tough but so is clearing any other competitive exam or leaning a new language or playing a musical instrument. Nothing comes easy, all it takes is determination and will-power. If you are strong willed and have made up your mind to pursue CFA, then nothing can come in the way of success.

Eligibility:
To sit for the CFA exam one must have a bachelor’s (or an equivalent) degree (or be in the final year of bachelor’s degree program) and 4 years of professional work experience. A combination of professional work and university experience that totals at least 4 years is a mandate.

Level I:
This exam is conducted twice a year in the months of June and December. Level I tests your knowledge on the ethical and professional standards. Average time preparation for this level is around 300 hours. Exam is scheduled to be held on 23rd June 2018, Saturday this year. This would provide the candidates extra 3 weeks to prepare for the exam. Exam results are generally declared in the month of August 2018.

This level focuses on basic knowledge and simple analysis. It consists of 240 multiple choice questions.  Let us look at the weightage of each subject at level-I.

CFA Level 1

Generally the time recommended to be dedicated for this level is approximately 300 hours.  it would mean devoting around 25-30 hours per week, I.e. approximately 100-120 hours a month of study to crack this level.  And in 3 months around 300-360 hours of study. This would become the larger plan, to work on the details, one would have to dive deeper, i.e. calculating how much time is to be devoted to every topic. We can see from the above chart; financial reporting and analysis (FAR) and ethics cumulatively contribute 35% of the syllabus. Therefore, spending more time on financial reporting and analysis is recommended. Financial reporting and analysis (FRA) talks about the bigger picture. Reviewing balance sheets, income statement, cash flow statements, notes etc. and how all these statements can be used to understand the business. Accrual basis of accounting and cash concepts, revenue recognitions, Management discussion & analysis, plans of liquidity, audit reporting, Inventories, income taxes and non-current liabilities etc. are some of the topics that are included in this.

Ethics forms a part of all the three levels, hence this subject cannot be taken for granted. One needs to complete the syllabus for this. It includes ethics and trust in the investment profession, code and ethics and standards of professional conduct, global investment performance standards etc.

There are slight changes in the curriculum compared from 2017 to 2018. Changes that have been reported or are newly added are listed below:

  • Corporate Finance: Leverage and Working capital
  • portfolio risk and return, part II
  • Equity valuations: Concepts and basic tools
  • Fixed Income markets: Issuance, trading and funding.
  • Introductions to alternative Investments


Level II:
Level II exam tests the application of the investment analysis and focuses on the valuation of assets. This exam is conducted once a year, typically in June. Average time preparation for this level is approximately 328 hours.

On the Level II exam, you will have a total of 120 items i.e. 20 brief description questions with 6 items each compared to 240 multiple choice items on the Level I exam. The Level II exam is worth 360 points, corresponding to the number of minutes on the exam. The 120 Level II items are equally weighted, 3 points each, with no penalty for incorrect answers.

Below is the given an average weights that are allotted to various subjects at this level. These weights are given in a range while we have taken the average basis papers.

CFA level II, How to crack CFA

For this level an aspirant needs to devote a total of 30-35 hours per week for 3 months to crack this level.

Equity Analysis weight age falls in the range of 15-25%. This section includes equity valuations and concepts, return concepts, industry and company analysis, discounted dividend valuation, free cash flow valuations, private company valuation, etc. This section would generally take about 50 hours including the sectional tests.

The weight of fixed income analysis is 10-20%. This section includes the term structure and interest rate dynamics, arbitrage-free valuation framework, credit analysis model etc. This section should take around 20-25 hours.

Ethics falls in the bracket of 10-15% while FAR or financial reporting analysis ranges between 15-20%. Some of the topics that FAR consists of are inter-corporate investments, employee compensation: post-employment and share based, multinational operations, evaluating quality of financial reports and integration of financial statement analysis technique. A total of 25-30 hours would be required to complete the syllabus for FAR.

There are slight changes in the curriculum compared from 2017 to 2018. Changes that have been reported or are newly added are listed below:

  • Currency exchange rates: Understanding equilibrium value
  • Dividends and share repurchases: Analysis
  • Pricing and Valuation of forward commitments

 

Level III:
Level III tests the aspirant on how they apply the concepts of portfolio management and compliance. Average time preparation for this level is around 335 hours. Level III exam consists of item set and constructed response (essay type) questions. Below is the given an average weights that are allotted to various subjects at this level. These weights are given in a range while we have taken the average basis papers.

 

CFA Level III

Portfolio management and wealth planning contributes around 40-55%. This section contains the following topics.

Behavioral finance, private wealth management and portfolio management for institutional investors contribute around 40-45% of this level. Behavioral Finance is considered a pretty straight forward subject, one does not want to commit too much time to this topic. 7-10 hours should suffice including test preparation.

Private wealth management includes managing individual investor portfolio, Taxes and Private Wealth Management in a Global Context, Estate Planning in a Global Context, Concentrated Single Asset Positions, and Lifetime Financial Advice: Human Capital, Asset Allocation, and Insurance. We recommend spending 30-35 hours to complete this section.

Portfolio management for institutional investor includes Managing Institutional Investor Portfolio and linking pension Liabilities to Assets. This topic should take around 10-15 hours of study.

Global Investment Performance Standards- This topic should take around 12-15 hours of study.

Fixed income analysis weight is around 10-20%. This section should take 16-20 hours.

There are slight changes in the curriculum compared from 2017 to 2018. Changes have been reported in the following topics or are newly added:

  • Managing Individual Investor portfolio
  • Taxes and Private wealth management in a global context
  • Asset Allocation and related decisions in portfolio management: Introduction and Principles of Asset allocation
  • Asset Allocation with real-world constraint
  • Fixed income portfolio management: Introduction and liability-driven and Index based strategies, Yield curve strategies and credit strategies.
  • Alternative Investments for portfolio management.

Bringing it all together:
Each level requires hard work and discipline. To get good result, one needs to be determined and focused.

Once your plan is created after consideration of time, weight age of the sections and your constraints, you have to stick to it. This requires following order and strict discipline. We recommend applications such as Focus me, app bock, self-control to help you overcome the overpowering information of the social media and mobile applications.

This leads to superior time management without any distractions and procrastinations. Also one can concentrate on practicing mock papers and questions from test banks.  This would then help you figure out how long can you sit and study with good quality attention span. Accordingly you can add breaks in your plan depending on your requirement and need. It is generally not advised to modify your plan but one can make fine-tune according to one’s intellect and want.

In the end, keep your eyes on the goal. Start early, be consistent with your studies and stick to the blueprint prepared initially and be disciplined at all costs. Many experienced financial analysts or portfolio managers fall in this trap of procrastination and the battle of CFA is lost. It is highly recommended to keep yourself motivated to complete all three levels of the exam. Push yourself to your most potential and pass with flying colors. Clearing the CFA exam not only proves the strength of your technical knowledge but also the mettle of your character.

Which Course to Purchase?
Wiley course is an online and a self-study course. This course is not only cost effective but also comes with many video tutorials (approx. 110+ hours).  After the purchase, till the time the aspirant does not clear all the levels, it is absolutely free. It provides the exam planner and a personalized study schedule to the aspirant which helps them to stay on track with their end goal. There are about 30-45 minute bite-sized lessons designed to help one learn faster and retain more. Wiley provides over 90 pages of formula sheets and print or e-book covering every lesson.

For aspirants who are close to the finish line and near the exam, Wiley provides a customized 11th hour final review course with 40 hours final review lecture videos and mock exam seminar (14 hours level III) and also the 11th hour review study guide (print or e-book).

It also offers 1000 hours of practice questions at each level .It gives dashboards and  performance metrics and video lectures by expert instructors (Level I= 90 hours+ Level II = 100 hours, Level III = 50 hours). 14-16 weeks of live virtual online classes are now also available to the aspirant and professional online mentoring – post the CFA exam takes this course one level up.

Best part of the course is that it offers you the convenience. In today’s daily lives, one is bounded by many commitments of jobs and family; therefore an online course like this gives one the flexibility and ease. With online mentoring one can easily clear doubts and get answers to their queries and questions. Hence we highly recommend this course for its convenience, flexibility and suitability.

Wiley Online Training is among the global leaders in international training for CPA, CFA, FRM, Data Science & Analytics. It has helped over 500,000 professionals across the globe. With Wiley Online Training, 9 out of 10 students pass their exams. Want to find out more? Call us at 0120-6291100/01 or drop us a quick message here

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