Hi, I’m Alexander Law, a final-year economics student at Baylor University. And in June 2017, I managed to pass the CFA Level I exam with just five days study.
My scores were over 70% in all subjects except Alternative Investments and Financial Reporting & Analysis (those were in the 51-70% range). No doubt luck had some role to play in this, but I believe I also did a lot to tip the odds heavily in my favor. I wanted to write this to share my experience and tips that I think is worth passing on.
I didn’t set out intending to just allocate five days of study for the CFA exams. And no, I don’t think it’s a good idea. But having just finished a round of eight final exams at my University, I was mentally shot. Additionally, because I had a family vacation scheduled for the two weeks preceding the exam, my study time was limited to just the long-haul plane flights and the three days before the exam. I decided to give it a shot anyway – there’s nothing to lose. And against all odds, I passed. And the best part? I managed to save a bunch of money on registration fees thanks to the CFA Access Scholarship.
The right study strategy makes all the difference when it comes to preparing for exams, and you could say I have considerable experience cramming in tons of material at the last minute. Here’s what worked best for me – hopefully they’ll help you.
Really Understand the Exam Format
Although I had limited time to study for the exam, I did spend time understanding the topic weightings and prioritizing according to their exam importance. I also read all I could about the exam and found out that Ethics would need special attention, not least due to the ‘ethics adjustment’ factor. So even if you’re in a rush, take some time to really understand what the exam is about, so that it can inform your study strategy. You can also learn more about all three CFA exams with the CFA Insights Guide.
The Right Background Can Give You A Head Start
It also goes without saying that background makes a huge difference with regards to how much study is necessary to do well on the CFA exams. While I didn’t have much work experience in the finance realm (my internships so far have been in other sectors), my extensive academic experience made a huge difference. I have taken at the graduate and undergraduate level nine finance courses, 10 economics courses, several math & stats courses, and two introductory accounting courses. As was reflected in my allocated study time – and my CFA results – FRA was my weakest subject by far. I also found that my undergraduate course work was much more relevant than my graduate economics coursework, with many topics in my economics classes being too specific or complicated to apply to the similar topics on the CFA exams, at least in Level I.
Nevertheless, I can confidently say that having a robust academic curriculum helps immensely, and if possible, any college student that is a prospective CFA candidate should take economics courses such as Money & Banking, Microeconomics, and Macroeconomics, and finance courses such as Investments Analysis, Options & Derivatives, Corporate Finance, and International Business Finance. While I can’t really comment on which accounting classes would be useful, I do know that IFRS is really important for you to study if your accounting courses have only covered GAAP. If you happen to be a college student without experience in any of these subject areas, then you definitely need much more study time, as there will be considerably more new material to cover.
Practice Exams are Key
One of the things I have learned from my hellish weeks in university is that practice exams are vital to testing what you do and don’t know. In fact, research studies indicate that taking practice exams are one of the best ways to study and retain material. Some caution though: with the CFA exams, you must keep in mind that when taking their online subject test exams, the questions are recycled from a bank of questions, so your improved performance on certain questions may just be you remembering the answers from before. Additionally, it is not uncommon for the website to crash the night before the exam, so you should definitely take these free practice exams early!
Plus, what I have found is that by taking the practice exam before I have fully studied all of the material, I can better hone into the areas I am weakest in, and spend less effort towards subjects I am already familiar with. This allowed me to really focus on specific topics such as IFRS, Technical Analysis, and Accounting Ratios. In fact, I dedicated the two of the three days I was back home after vacation solely to practice tests, which allowed to learn how to use the calculator and really learn the relevant formulas.
Make Your Own Formula Sheet
For the math driven portions of the exam, I recommend making and memorizing a formula sheet – especially since you won’t have one on the exam! While stuff like the annuity formula may be less useful to you since your calculator will have the function built in, stuff like the breakdown of ROE via Dupont Analysis, elasticity calculations, and the Dividend Growth Model are just a fraction of what you may find useful to have for quick reference.
I like to keep my formula chart on hand when going through the practice problems to get familiar using the formulas and my calculator, and you may find the formula chart a useful reference in the lunch break between exams. While I did not study during the lunch break, there are definitely people that do, and you may even find that it is a useful time to take a quick nap to boost your mental acuity. The exam is long, and I definitely saw people nodding off right before and during the exam.
Additionally, I recommend thoroughly reading the CFA material for Ethics, since the subject material is specific to the CFA Institute and charterholders, and a substantial 15% weighting for the exam. The Ethics portion can be used as a sort of ‘tiebreaker’ for determining whether an on the border candidate should pass. This was the first subject I studied (because it was luckily the first in the curriculum) and while I only got through about 70% of it, it made a big difference focusing on this first. Even so, I commonly found myself being overly conservative in my intuition, assuming things were unethical when they technically were acceptable.
Additionally, you will need to know not just whether the action presented was ethical, but also which part(s) of the CFA Code of Ethics and Standards of Professional Conduct was violated. It is not enough to just know that there was “Misrepresentation”, but also that that falls under “Professionalism” and not “Duties to Clients”. If you can accurately pinpoint these details, and what change of action would have prevented the violation, then you are in good standing for the Ethics Section. Questions can also be very confusing even as a native English speaker, so carefully read the question, and if English is not your first language, you should invest additional practice on this section to ensure that you understand precisely what the question is asking.
Aggressively Manage Your Exam Time
For me, time is seldom an issue with exams, and with both the practice and real exams I had enough time to go through all the questions two or three times. However, I know that time is a big concern, with a maximum average of 90 seconds per questions required to complete every question. If you can shave 10 seconds off per question, that gives you time to review 15 questions you were unsure of, if you shave off 30 seconds, you can review 60 questions! You obviously shouldn’t rush, but quickly answering the questions in topics you are very familiar with can be vital to give you much needed time for those subjects that require more processing or which you are unsure of.
Sometimes on an exam, I spend five or so minutes on a certain question either because it is an involved multi-step calculation, or because the answer I calculated doesn’t match any of the choices. Don’t waste time like this if you don’t have to, especially since most of the time, it is easy to eliminate one of the three choices if you have at least a passing familiarity with the material. If you can be 100% sure of the answers to half of the questions, and correctly guess at a 50% rate for the other half, you’ve just passed the exam!
Get Familiar with Your CFA Calculator
One disadvantage of my background is that before I started my business classes, I had primarily science and math classes, and had used my TI Nspire CAS calculator since middle school. This meant that when the CFA exam came around, I had to get familiar with a simpler calculator – either the TI BA II Plus or the HP 12C. I do recommend the TI BA II Plus Professional if you choose the TI for its algebraic notation, as the additional functions on the Professional prove quite useful on the CFA exam for those relevant questions and save you precious time. If you’re looking for full guidance, you can get 300 Hours’ BA II Plus calculator guide here.
If you are able to get intimately familiar with the HP 12C though, it is a very quick calculator due to its RPN notation, which requires less keystrokes, but many people are not familiar with this, so I do not recommend using the 12C if you are studying with a time crunch.
Don’t Get Overconfident, Either
You also don’t want to get overconfident in your abilities just because you have an extensive work and/or educational background;. Despite having taken nine finance courses, none of my classes covered technical analysis, which was an important subject for the Quantitative Methods portion of the exam, and there were areas of Economics that I was still lacking or had forgotten. This is why taking practice exams is so important, and if possible, reviewing material that condenses the main subjects into ‘soundbites’ so you can quickly ascertain what you are familiar with and what you need to focus additional study to.
While I only used one additional study material outside the CFA curriculum, what it was invaluable for in my time crunch was providing a quick reference to formulas and a breakdown of each CFA section into subjects which I could then determine how much study time to allocate to.
Other Important Lessons Learned
Have a detailed study plan (you can get one free here) you dedicate yourself to
- While I was fortunate enough to have started on the Ethics section, and thus spent the majority of my airtime reading that at a leisurely pace while jetlagged, this was definitely less than optimal, which was demonstrated from my much poorer performance in FRA. Know where your strengths and weaknesses are and structure your gameplan accordingly.
Don’t forget to take practice questions early
- Another mistake I made is not attempting practice questions until my final three days of study back home. I also would optimally have studied throughout the family vacation instead of just the plane flights, but regardless, if I had started practice questions early, I would have picked up that there were critical areas in FRA and Economics that I needed work on, and would’ve been able to focus on those areas specifically. I didn’t have access to a computer though, so paper practice exams from a 3rd party would have also been useful.
Fully understand why you got a question wrong
- I think I did a good job of this on Ethics, but when the reason you get a question wrong is you simply don’t remember the material, that is a red flag that you definitely need to hone in on that. Simply put, knowing the right answer is not enough; you must also know why the wrong answers are wrong.
Learn your relevant formulas and their application
- Having waited until the last days to write down the formulas meant that there were many questions in the FRA section of the practice exam I simply had no idea what the answer was, but which were simple with the formula sheet as a reference. I also found that even if I memorized the formulas, they were useless without remembering their application, which is why the practice questions were so vital to my understanding of the material.
Seek connections between related subjects
- One strategy I have found helps me to save time studying is identifying cross connections in material, such as between different classes. This is also possible to some extent within or across some subjects of the CFA exam, and between levels of the exam (such as Ethics across the levels). If you can identify any themes as such, you will find that this can be helpful as you continue your journey, but it still cannot make up for lack of study.
Side Note: Apply for Scholarships!
As a college student, you can apply for the CFA Awareness Scholarship to reduce the registration fees down to $350, and have a good chance at the CFA Access Scholarship that reduces the fees to $250. While your University needs to be either a CFA Program Partner or in the CFA University Recognition Program (which you can check online) for you to apply to the Awareness Scholarship, the Access scholarship is still a great opportunity.
Additionally, according to one of my professors, who is on the committee which decides the recipients at his local charter, despite the huge population of the city, there are not that many applicants. Thus, even if you think you do not have the best chances, it is still worth applying considering how many scholarships fail to be distributed due to a lack of qualified applicants, and as a college student, your chances of qualifying for the need based portion are even better!
Although I managed it, I definitely do not recommend last-minute cramming for the CFA exams. However if you’re already in this situation, hope the above advice will help improve your chances. If you have any questions for me, just drop them in the comments below.