The Three Things I Wish I Had Done Differently in my CFA Exam Preparation

Prepare for the CFA ExamWhen I took the CFA exams between 2009 and 2011 I was overwhelmed with each and every one of them like most candidates. The sheer amount of reading and practice questions, next to a demanding work schedule seemed almost too much at times, to the point where the well-meaning postcards that I had received from CFA institute along with the study material that stated “Coffee is a food group” seemed not so funny anymore.
 

I was lucky enough to pass each level at the first attempt, but the price for it was quite high. In those three years, all of my free time was spent reading and learning, with little left for my family and friends (other than my CFA study pals). At times I just wanted to give up and postpone the exam to the next year, but I somehow pulled myself together, stayed motivated and pushed through. I am happy I did, but there are a few lessons from my experience that I learned during this time that could help future CFA candidates in their exam preparation. Even though I think I approached the CFA exams quite well, there are a few things that I would change to increase my learning effectiveness. Here they are:
 

  1. Allocate more time. I reserved about six months practice time to each level of the CFA. As it turned out this is really the minimum, and I should have allocated at least eight (or even ten) months, including solving practice questions. So if you get started for the CFA, you can do it in six months (perhaps even less if you have a lot of free time), but for working professionals, eight months would be somewhat comfortable.
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  3. Read faster. When I set out for CFA level 1, I took much too long to read the original material. In later levels I figured out speed reading and SQ3R, so this helped me tremendously to get through the reading material faster. While I read the CFA books, I simultaneously took notes in question-answer format (my CFA study notes), so this slowed down my process even more but was extremely useful in the review phase. Faster reading techniques helped me to have more time available for solving practice problems and to review in the later levels, so I think familiarizing yourself with cursory reading techniques can help you quite a bit in your CFA exam preparation, but also in other reading tasks.
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  5. Solve all original practice questions in the CFA books before solving any practice exams. I figured this out in level three only. Before that, I was busy solving almost the entire Schweser Q Bank next to reading through the material. I should have spent much more time on those practice questions and my question-answer notes, as the exam questions will be written in that style. So for level three I copied all the questions out of the books and reviewed them periodically. This was excellent practice and repetition at the same time. I should have done this for all levels.

 

These are the main things I would do differently if I took the CFA all over again. I am actually studying for another finance certification now, and I am using these techniques to speed up the process. You can do the same to get through your CFA exam preparation faster and more effectively!

How to Stay Motivated for the CFA Exam

Stay motivated for the CFA examMotivation is a very individual subject, but still, there are some tips and tricks to stay motivated when studying for the CFA exam (or any other exam, for that matter). The CFA can be especially tough because most of us study all by ourselves. It’s much easier in university to stay in the groove when you have classmates and fellow students to interact with and solve and discuss problemsets with periodically. As most of us attempt the CFA after our university studies, we’re often not used to cramming anymore, so we have a tough time keeping the motivation going when it comes to the final stretches of exam preparation. When we started late in our preparation, this can become a serious issue. Believe me, we have all been there, but it’s possible to break through the motivation barrier and prepare well and effectively for the exam. Here are some simple tricks that have helped me and other CFA candidates with motivation:
 

  1. Set a study timer. I have a timer on my desk that I set to 1-2 hours, depending on how much time I have available. I studied for the CFA after work, beginning at about 9 PM, so right when I sat down on my desk, I set this timer. There are also software timers available, just search on google for them (I have one called “mintimer”, for Windows XP). Whenever I feel distracted and wanted to do something else (check email, etc.), I look at the clock and say to myself: “I will do that afterwards, in … minutes.” Before the time was up, I did not allow myself to get up or do anything else. Try it!
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  3. Become more efficient with reading. The CFA material is vast, and you can save a lot of time by learning how to read faster. There are many tricks that help you speed up your reading technique and study skills. Speed reading is one, SQ3R another. Find out what works for you. More information in this blog post: How to Read Faster in your CFA Exam Preparation.
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  5. Give yourself rewards. Not only Pawlow’s dogs reacted to positive stimuli, you can train yourself just as well. When you studied hard and did a good job at staying focused, reward yourself with something small, like a cookie or other small token. Your brain will become conditioned to seek out these experiences again, and will tell you to study harder. I am doing this all the time, with small study break where I listen to a song or watch a short video on youtube. But make sure you get back to studying in time again (I also set a timer for this…).
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  7. Set priorities. You do not have to be a deep expert in all CFA topics. You may have studies some already in school (like accounting or economics), so focus on the ones that you know least about first. If you’re really strapped for time, it’s much better to be a generalist and know a little about every topics, so you can solve the problems in the exam by excluding the answers that are most likely not true. More information in this blog post here: CFA Exam Preparations in a Hurry.
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  9. Last resort: Cognitive enhancers. This is a very controversial subject, and I already know I will be criticized for mentioning it here, but consider this: There are many people in finance who (heavily) rely on cognitive enhancers, both legal and illegal. Cognitive enhancers are ADHD drugs like Ritalin, chemical compounds like Racetams, but also natural substances like black tea or coffee. While I definitely advise you to only use legally available substances, there are certainly a huge number of finance professionals making a ton of money by being on the edge with all kinds of substances. Cognitive enhancers are also called “nootropics.” Just google for them, and you will find a plethora of information (but don’t lose too much time, studying is more important!). I use caffeine and a B-vitamin complex to help me concentrate, and these are rather general and available anywhere. If you really have persistent concentration issues, there is a small chance you may suffer from ADHD and should consult with your doctor.

 

I hope this helped you in staying motivated. I almost did not want to publish this post because it looks in it like I am a total control freak (with the timer and all…) and a proponent of drugs. I am certainly neither, but just wanted to point out some hints if you’re seriously stuck in your preparation. Most CFA candidates will just have to force themselves and push a little harder to finish their reading and practice problems, so it’s more a question of self-discipline. Anything that is worth achieving is hard in one way or another, and the CFA charter is no exception (unfortunately).
 

I wish you all the best for your CFA preparations!

Active Recall: How To Retain Information For The CFA Exam Like A Genius

Active Recall to study for the CFA examWhen I first looked at the material required for the CFA exam, I asked myself: “How will I ever remember all of this at the exam?” I am sure you have at some stage in your CFA exam preparation faced a similar question. It it tough to remember all the important concepts for the exam, but it can be done as the growing number of CFA charter holders each year proves. Passing the CFA exam is by no means rocket science, and you must not be a genius to master the curriculum. Using simple techniques and a little self discipline, you will be able to remember information you read much better.

Life-long learning is actually a hobby of mine. The technique I am using in my own learning is called Active Recall.
 

What is active recall?

 

From Wikipedia:

Active recall is a principle of efficient learning, which claims the need to actively stimulate memory during the learning process. It contrasts with passive review, in which the learning material is processed passively (e.g. by reading, watching, etc.). For example, reading a text about George Washington, with no further action, is a passive review. Answering the question “Who was the first US President?”, is active recall. Active recall is very efficient in consolidating long-term memory.

 

For active recall to work properly, it is important that you convert the study material into questions. Some studies call this method of learning “retrieval-heavy”, meaning your brain has to search for answers while reading. It has been shown that test subjects have done up to 50% better using active recall learning methods than control groups who learned with the conventional method of rote learning (Karpicke, Roediger, 2008 and Karpicke, Blunt, 2011). The authors concluded that more rigorous testing leads to better retrieval in the future.

We have all been told to take notes while reading, so how is active recall different from note taking? Since active recall will create questions for you to answer, it’s very different from notes that you re-read passively later. Conventional notes are just short summaries, but they will do little to stimulate your memory. Active recall study techniques will really challenge your memory to come up with a summary yourself rather than just re-reading it, so I think it’s far superior.

Again from Wikipedia:

[…] there is much support that active recall is better than rereading text for enhancing learning. In fact, Karpicke, et. al. (2009) believe that students get “illusions of competence” from rereading their notes and textbook. One reason for this illusion is that the text contains all the information, so it is easy to glance over it and feel as if it is known well, when that is not the case at all. Better put: in the text, the cue and corresponding target are both present, which is not the case during testing. The results of their study showed that retrieval as a study strategy is rare among students. They prefer to reread instead.

 

Active recall is a relatively new study method, and it has not transpired to the mainstream yet. There are many obvious benefits though, and I am sure active recall will be more widely used in study material and by authors of scientific text in the future.
 

How can you use active recall to learn for the CFA exam?

 

Ideally, you should use each learning objective of the CFA curriculum as a question that you can answer in your review before the exam, but unfortunately, most study material is not written in Q and A form as it should be for optimal learning. I created special CFA study notes that support active recall, feel free to check them out if you like. I think you will benefit immensely from using active recall learning techniques for the CFA exam and any other exam. All the best in your exam preparation!

Which Is The Best Calculator For The CFA Exam?

Choosing the best calculator for the CFA exam is a personal choice, but having the right calculator can save you a lot of time during the exam. I will outline in this article how I used the Texas Instruments BA II Plus Professional during the exam with success. This is also the calculator I recommend for the exam if you don’t already own another model of the allowed calculators.

CFA Institute allows the following models at the exam:

  • Texas Instruments BA II Plus (including BA II Plus Professional). The BA II Plus cost approximately $28 on Amazon, the Professional approximately $40.
  • Hewlett Packard 12C (including the HP 12C Platinum, 12C 25th anniversary edition, and 12C 30th anniversary edition), available for approximately $60 on Amazon.

Each has its pros and cons, but to cut a long story short:
 

I recommend the BA II Plus Professional for the CFA exam.

 

Let’s first start with images of all allowed calculator models:

Texas Instruments BA II Plus Professional

Texas Instruments BA II Plus Professional

Texas Instruments BA II plus

Texas Instruments BA II plus

HP 12c

HP 12c

The HP 12c is a somewhat older model of a calculator than the Texas Instruments models. In my opinion, unless you already own a HP 12c and really love it, I would certainly not purchase this calculator for the CFA exam as a first choice. It’s more expensive than the TI models and using it is somewhat clumsy and different from from other scientific and financial calculators. I personally did not like the feel of the buttons, and found the price point a bit steep for such a dated piece of machinery.

The Texas Instruments BA II Plus is affordable and fairly straightforward to use. For all three levels of the CFA exam I used the TI BA II Plus Professional, and it was great. You can also use this calculators for a range of other financial certifications, such as the FRM or the ERP, and even in your work as a finance professional.I find it very helpful to quickly calculate NPV or IRR without using an Excel spreadsheet.

In level 1 of the CFA exam, the most common more involved calculations you will need are NPV and IRR calculations. The BA II plus is very intuitive, and I was able to use the calculator to my full advantage without ever accessing the manual. The calculator has a bunch of statistical features also, such as calculating standard deviation, which can be useful. However, you can also calculate standard deviation with the formula you learned in almost the same time, so you don’t even need many of the features the calculator offers.

CFA Institute takes its calculator policy very serious, so don’t even think about using a different model than the ones suggested. From the CFA Institute website about their calculator policy:

CFA Institute strictly enforces all policies with regard to calculator usage during the exams and candidates are required to abide by the policies of CFA Institute. Your calculator will be inspected prior to the start of the exam. Your calculator must remain on your desk in full view and proctors will continue to inspect calculators throughout the administration of the exam. Possession or use of an unauthorized calculator at the test center will result in the voiding of your exam results and may lead to the suspension or termination of your candidacy in the CFA Program. Failure by the proctors to detect an unauthorized calculator prior to the start of the exam, or your use of an unauthorized calculator at any time during the exam, does not imply that the calculator is an approved model or that your scores will ultimately be reported. Calculator covers, keystroke cards, and loose batteries are permitted in the testing room; instruction manuals are not. You may keep a small screwdriver with you if necessary to replace batteries in the BA II Plus.

Before the exam, you will be asked to clear the memory of your calculator. You are allowed to bring a spare battery and a small screwdriver to change the battery, but you may be asked to unwrap the battery and/or place everything on the floor. I brought all of this with me, but luckily never used it. The battery of the BA II Plus Professional was good (and still is) for more than three years and for all three levels of the CFA. You will also see many candidates with two calculator at the exam (one used for backup). I don’t think this is necessary, as the battery will most likely not run out during the exam, but if it makes you feel better, get another BA II Plus for about $28 on Amazon as a backup.

I believe you will be very happy with either of the Texas Instruments models. I chose the Professional because of the look and feel, but the normal model is less expensive and offers almost the same range of features.

I hope this helped with your calculator choice, and I wish you all the best for your CFA exam preparations!

Do You Need Expensive Study Material For the CFA Exam?

CFA books

We all received a big box with the CFA curriculum from CFA Institute with our registration for the exam for each level. The books in itself are intimidating, partly because they look like a pile of phone books, and because they seem very densely packed with information that needs to be mastered for the exam. When I saw these books for the first time in level 1, I asked myself: “How am I ever going to get through all these in time?” That’s exactly where providers of third-party study material come to our attention when we start google searching for an easier way to acquire the required knowledge.

There are many providers of learning material out there. Their prices fluctuate anywhere from a few hundred dollars to several thousand, depending on the package provided. Some offer comprehensive video lectures, question banks, and their own condensed version of the curriculum.

Do you need this to succeed? The short answer is: “No.”

Stick with the original study material

 

In my opinion, there are no shortcuts to the CFA designation. Like they say only half-jokingly: The MBA you buy, the CFA you earn. You have to know the concepts in order to pass, there is no faking it. Also, each level will be founded on the previous level, so you have to commit this knowledge to long-term memory. The original curriculum is excellently written. It covers everything you need to know in the language of CFA Institute, backed up with many questions and case studies that help you further understand the material.

Many learning providers simply re-write the original curriculum in their own language and claim it is easier to understand. I believe that finance and investment has its own universal language, and the original material is written in this language. In order to pass the CFA exams you need to become fluent in it, otherwise you will stall in level 2 or latest in level 3, when it becomes really tricky.

Another argument that’s often used is that you don’t have enough time to cover the original material, that’s why you should go with third-party study courses. Again, I disagree. For level one, really take your time. You should be able to get through the material in six months minimum next to a day job, but better would be a whole year. The CFA is not a quick thing, so it’s no shame if you take your time to understand the material. Taking a shortcut when reading the material will not work.

Where do shortcuts work?

 

There is one stage where you can accelerate the learning process: The review stage. While reading through the curriculum you should take notes and make your own summaries to help you remember what you have read. But how exactly can you drill the material for the exam? Definitely take advantage of a study solution when reviewing the material, as these are inexpensive and worth it. I recommend you take a look at the Financial Analyst CFA Study Notes. They cost the price of half a dinner, and take a very unique approach at reviewing the curriculum. The Schweser QBank is also recommended for level 1, as this simulates questions you will find in the exam. For level 2 and 3 I personally found the QBank unnecessary. In level 3 I actually never even looked at it. What a waste of $300!

Another useful thing is to get together with other CFA candidates once you have read the original material and have reviewed it. But don’t do this too early, as you can’t learn together, only review. Once you’re at the point where you solve practice exams is ideal to access a study group. This can also be just one other student. How can you connect with other CFA candidates? Try the free study group finder on this page.

Conclusion: Start early in your CFA preparation with the original material.

 

You will benefit from thoroughly studying for each level, both for subsequent levels and your professional career. I wish you all the best for the CFA exam!