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!

How To Study Ethics Effectively For the CFA Exam

CFA Ethical Compass

Ethics is a tough topic on any level in the CFA curriculum. The Standards of Professional Conduct are not to be confused with common sense as there are many special cases relating to finance that require much deeper knowledge. To add a little spice to the mix, CFA Institute also puts forward the Code of Ethics that complements the Standards of Professional Conduct. When you study Ethics for the CFA Exam you must know your way around the  seven CFA Standards of Conduct and the Code of Ethics. To distinguish the two, remember the following:

The Standards of Conduct tell you what to do, and the Code of Ethics tells you how to do it.

 

The seven Standards of Professional Conduct are the following:

  1. Professionalism
    A) Knowledge of the Law
    B) Independence and Objectivity
    C) Misrepresentation
    D) Misconduct
  2. Integrity of Capital Markets
    A) Material Nonpublic Information
    B) Market Manipulation.
  3. Duties To Clients
    A) Loyalty, Prudence, and Care
    B) Fair Dealing
    C) Suitability
    D) Performance Presentation
    E) Preservation of Confidentiality
  4. Duties to Employers
    A) Loyalty
    B) Additional Compensation Arrangements
    C) Responsibilities of Supervisors
  5. Investment Analysis, Recommendations, and Actions
    A) Diligence and Reasonable Basis
    B) Communication with Clients and Prospective Clients
    C) Record Retention
  6. Conflicts of Interest
    A) Disclosure of Conflicts
    B) Priority of Transactions
    C) Referral Fees
  7. Responsibilities as a CFA Institute member or CFA Candidate
    A) Conduct as Members and Candidates in the CFA Program
    B) Reference to CFA Institute, the CFA designation, and the CFA Program

The Code of Ethics are the following:

  • Act with integrity, competence, diligence, respect, and in an ethical manner with the public, clients, prospective clients, employers, employees, colleagues in the investment profession, and other participants in the global capital markets.
  • Client interest first. Place the integrity of the investment profession and the interests of clients above their own personal interests.
  • Use reasonable care and exercise independent professional judgment when conducting investment analysis, making investment recommendations, taking investment actions, and engaging in other professional activities.
  • Practice and encourage others to practice in a professional and ethical manner that will reflect credit on themselves and the profession.
  • Promote integrity of capital markets, and uphold the rules governing capital markets.
  • Maintain and improve professional competence and strive to maintain and improve the competence of other investment professionals.

Now how to study best for this topic? Start by memorizing both the seven Standards of Professional Conduct and the Code of Ethics.

There is really no shortcut in Ethics.

 

You have to bite the bullet and read very carefully book 1 of the CFA curriculum. If you fully understand book 1, this is sufficient to cover all you need to know about ethics. You should work through all the examples, but this only makes sense after you know the Standards by heart. Print the list above and hang it above your desk (that’s what I did). Put a small copy in your wallet, so you can revise it on the go.

Once you know the Standards, Ethics is a very logical topic. You basically just have to overlay the seven Standards over any problem and then figure out which Standard is violated or not. It becomes very clear once you work through the examples. I would start with Ethics first so you have enough time to let the topic sink in until the exam.

If you’re interested, you can download my personal notes for ethics that I made when I studied for level 1, just to double check your own notes. Feel free to download them here.

I wish you all the best for the CFA exam!

Is There A Magic Pill For the CFA Exam?

Magic Pill for the CFA Exam

Let’s be honest: The preparation for the CFA exam is not a walk in the park, not a piece of cake, not easy as pie… you get the point. If there was a proven (legal) shortcut to passing the exam, would you take it?

In my experience, the magic bullet with any exam preparation is time. If you have enough time on your hands, even the most daunting subject becomes manageable because you can break it down into small chunks that you can study bit by bit. To get more time for your exam preparation you can either start earlier or look for an increase in effectiveness, so you can stretch the days and hours you have on your hands. Let’s look at the latter here, shall we.

The big question is:
 

Where can we take shortcuts in CFA exam preparation?

 

It is absolutely important that you read all the required reading for the exam. This is provided for you conveniently by CFA Institute with your signing up for the exam for each level. You should definitely look into ways to speed up your reading process. A speed reading technique is detailed here in another post (How To Read Faster In Your CFA Exam Preparation), so you should read it if you’re not familiar with speed reading.

You should also have a study plan that outlines how much reading you have to get done per study session. Take the amount of days in your study period minus your review period (30 days works quite well) and divide the total of reading pages of the curriculum by that number. You end up with a number of pages that you must complete, otherwise you fall behind. Strictly adhere to your study plan.

What has helped me quite well to gain time was to skip all the exercises in the books and revisit them in my review phase. I know, this is not recommended, but it will save you a tremendous amount of time. Then solve all of the exercise block in maximum seven to ten days during your review period.
 

Use it or lose it: Practice for the CFA exam

 

Once you have read the material, you have to practice it. Most people recommend solving the Schweser QBank, but this takes a lot of time and is incomplete, as you may have found out already. you can’t possibly solve all the questions in the QBank, so you will miss out inadvertently on some learning objectives (LOs) if you use this as your learning tool. I have not found a suitable tool yet that will really help you practice very fast and efficiently, so I made my own. It’s called the Financial Analyst CFA Study Notes. The unique thing about is that it covers all the most important LOs with one question each that will answer and summarize the LO for you. I believe it’s a very useful new kind of study solution, one that will save you a lot of time (and money)!

The last step of your exam preparation should be practice exams. Make sure you really stick to the timing you will encounter in the exam. I write another article about exam strategy that may come in handy here: CFA Exam Strategy: Go For Speed.

With these tools I believe you can speed up your CFA exam preparation and lengthen the time available to you. It’s obviously always better to start earlier, but in some cases (mine included), this is just not possible. I wish you a speedy and effective study experience!