Making the Most of Your CFA Prep

Choosing to embark on the path to your CFA charter is a big decision that needs to be made only after understand the commitment needed to succeed.  

I have been teaching a CFA Level I prep class for the past five years, and the single most important thing I have noticed when examining the difference between success and failure is a student’s willingness to put the time in to study independently.

Independent Preparation

Too often, I have students attend my classes unprepared, expecting to learn the material during the class. In reality, the majority of prep classes are structured as reviews, meaning the students should be studying the material and learning the key concepts and formulas prior to coming to class. This way, in class, students can focus on getting help with the concepts that have been an issue during their independent study time.  

However, students frequently assume the prep classes are there to teach the concepts for the first time. Typically, this type of student sits in class trying to learn the material in its entirety—and often fails to absorb it. This is because the material for the exam is very complex and it requires significant study time to master.  

In my experience, when students come to class unprepared, it shows. I spend a couple of hours reviewing the material, then, when it's time for review questions, there is generally silence, as the students have not prepared and do not know the material. There is limited benefit to reviewing sample questions when the class doesn’t know the material!

But with proper review prior to class, students can maximize their learning by focusing on the parts of the curriculum that are giving them the most trouble.  An added benefit is that if the material is already familiar, more time can be made available for practice questions that the students can work on themselves to get the most out of the process.  

Scheduling for Success

If a candidate chooses to study on their own without the help of a review class, then the key to success is to create a schedule to learn the material.  

Organization and consistency are important factors. Starting early and making a plan for learning the material is the best way to succeed. The pass rate is as low as it is currently because too many people think that cramming for a couple of weeks prior to the exam will give them all the knowledge and skills they need.

Not so! The body of knowledge for the exams is detailed, covering many different aspects of finance from accounting and statistics to portfolio management.  

However, by setting a schedule that spans a multi-month period, the material can be mastered in time for the exam. An hour or two each night over many months schedule will make the process much less daunting than it would seem.  

The body of knowledge is similar to a finance course in school, so it needs to be treated like a full-term course. Doing weekly readings with review questions will help keep the material from becoming overwhelming.  

Ideally, a candidate would allocate four months to learning the material and spend the final month taking practice exams to ensure mastery of the topics.  

Flashcards

A helpful tip is to use flashcards to learn the various formulas needed for the exam. For example, there are three ways to find the cost of equity for a company: 1) CAPM, 2) dividend growth model, and 3) bond yield plus equity risk premium. The only way to know which one is needed to answer a question on the exam is by determining which inputs are given and which formula they are for.

The other benefit of flashcards is that you can take them with you to use when commuting or during lunch to maximize your study time and efficiency.

The course work seems daunting at first, but with a structured plan of attack—either with a review course or completely through independent study—you can do it! Be consistent and formulate a schedule for learning the different topics covered in a thoughtful and consistent way and you’ll be well on your way to obtaining your CFA charter.   

 

About the Author

James Anders, CFA, is an investment professional with more than 20 years of domestic and international investment research experience in both equity and fixed income securities.  He has extensive experience performing deep fundamental research on individual securities in order to make buy/sell recommendations for investment portfolios. James gained international experience living and working in Asia. In addition, he teaches parts of a CFA Level I prep class at Florida Atlantic University.

James Anders