Chartered Financial Analyst (CFA)

What is the CFA Desingation?

You've probably heard of it, but do you know what it means?

According to the CFA Institute, the Chartered Financial Analyst credential is the most respected and recognized investment management designation in the world.  It is only after passing a series of three sequential exams, meeting work experience requirements, having professional references, being accepted for regular membership by the CFA Institute, and becoming a member of a CFA society will you be considered a charter holder. If you are considering the CFA program as an easy way to boost your resume credentials than think again – in 2016 only 43% of those who took the Level I exam passed and it is recommended that a candidate spend over 300 hours studying for each exam. If you are up to the very rewarding challenge, below are a few tips that will help you prepare.

Get Through the Material

There is nothing worse than going into a test ill-prepared – especially if it cost you over $1,000 between materials and registration fees, and took over 300 hours of studying. As previously mentioned, a candidate in the CFA program needs to pass three tests: Level I, Level II, and Level III.  As of the date of this writing, the Level I test is offered in June and December, and the Level II and III tests are only offered in June.

The Level I test covers a vast amount of information, so the best thing that can be done is to make sure to read through all of the materials. Just for this exam there are 6 text books with the following topics, each weighted differently on the test: Ethical and Professional Standards and Quantitative Methods; Economics; Financial Reporting and Analysis; Corporate Finance and Portfolio Management; Equity and Fixed Income; and Derivatives and Alternative Investments.

Since there are so many topics on the first exam, the candidate will be better off on test day having some knowledge on all of the topics instead of a concentrated understanding of just some of them.

Flash Cards

The best way to keep vocabulary, concepts, and formulas in your head is by constantly reviewing them – flash cards make this easy.  Do not be surprised if you have over 100 flash cards just from the first text book.  A way to make flash cards more effective, especially when studying for the CFA exams, is to color code the flash cards depending on what main topic they are from. For example, have all the Ethical and Professional Standards information on orange cards and all Accounting information on blue cards.  Using acronyms and adding shortcuts to the flashcards will also make remembering tricky concepts easier.

Flash cards will not be useful if you are just memorizing the words – if you understand the underlying concepts you will be able to see the big picture.

Practice Questions

Practice questions and online quizzes are another way to prepare for the tests. Within the pages of each text book there are practice questions and examples to work through.  All of the work is shown and the answers are provided. In addition to the questions that are throughout the chapters, at the end of each one there are practice quizzes that go over important vocabulary and concepts.

The CFA Institute also sets you up for success by providing the candidate with online practice tests for each subject, and full length, timed, mock exams.  Not only does the CFA Institute offer practice tests, there are websites and companies that specialize in preparing candidates for the exams, including Wiley and Kaplan/Schweser.  As a candidate, you will want to use all of the resources available to you in order to be successful.

Make sure you aren’t just memorizing the answers when you retake the practice tests offered through the CFA Institute – memorize the concepts behind the answers.

Stay Current

Even when you are not reading the study materials or working through practice questions, you should always be thinking about how your studies relate to the real world.  Calculate financial ratios, such as earnings per share (EPS) and price to earnings (PE), by analyzing company financial reports.  After, check websites such as Yahoo Finance and Google Finance to see if what you calculated match what they have listed.  Also, look at charts of stock prices and use technical analysis techniques to estimate future price movement.

It will be easier to retain information if you are applying the concepts to the real world instead of only reading the text books and working through practice questions.

Don’t Look Back

If you think that the CFA designation is something that you would like to obtain then start studying – the sooner the better.  These three post-nominal letters will showcase your determination, perseverance, and professional competence in the field of finance.  Completing all three levels is a huge time commitment and you will need to make many sacrifices in order to become a charter holder.

Thinking about getting a tutor for the any of the CFA exams? Click this link for information on how The Daily CPA can help.

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