If you are just currently starting toward study for the CFA Level 1 examination, this guide could help you effectively prepare for the examination in three months. Passing the test with three months of prep is an intimidating task; the attack plan mapped out below search for to aid you slay the dragon.
This study plan is founded on notes taken from my trip over the Level 1 CFA examination. There might be certain curriculum alterations in the next exam (CFA Institution likes to create adjustments from year towards year), so be certain to compare this guidance through the authorized CFA Institution books for your examination.
At this point, you will perhaps need as a minimum 20-25 hours of reading per week, and more as the exam date approaches.
Ethics, Quant, and Econ
Ethics would cover the code plus standards, plus GIPS. Expect this to be 10 – 15% of your probes. These are critical problems. If you have a marginal score Ethics might be the deciding issue. Using flash cards can help you review this material as you work over later segments.
Quant is actually intimidating for numerous L1 candidates. Those of you with mathematical backgrounds would find a mixture of review plus new material. Anticipate Quant to be 10 – 15% of your problems. You have to understand a lot of concepts, including the time worth of money, return/yield calculations, measures of vital tendency (ex. mean) plus dispersion (ex. regular deviation), sureness intervals, and overall hypothesis testing.
Econ must be a review of several general micro and macro principles from your school days. Suppose this to be 10% of the exam.
Financial Reporting and Analysis and Corporate Finance
The blend of FRA as well as Corporate Finance might be the biggest test section, covering 25-30% of the CFA level 1 exam. This material represents building blocks for the L2 examination; give this section enormous respect.
You must distinguish how to read and interpret the three main financial statements (income statement, balance sheet, as well as the statement of cash flows).
The later stages of the of FRA section require you to write a lot of flashcards to understand the key differences between US GAAP and IFRS.
After all this, Corporate Finance is still a big part of the exam. This will comprise capital budgeting, the price of capital, working capital supervision and subjects in corporate governance.
Finally, the stock market! Equity to be 10-15% of your CFA level 1 questions. Expect to see a split among the generalities of marketplaces (organization of exchange, indexes, margin exchange, and marketplace efficiency/EMH) and real valuation (elementary models, decisive the essential return on communal equity, and business analysis).
Certainly, bonds follow stocks (in spite of being an expressively larger section of the global capital markets). Fixed Income might be 10-15% of the examination. You will be required to understand elementary features of fixed income securities and their pricing. Lastly, you will have to understand how to do simple credit analysis on fixed income instruments.
Derivatives, Portfolio Management, as well as Alternative Investments
The Derivatives segment of CFA Level 1 is actually more of a teaser of concepts to come; L2 plus L3 will get harder so enjoy L1. Derivatives would be in the ballpark of 5% of the exam. You will learn about forwards, options, swaps, futures, and some rudimentary risk management application. Put-call parity, alternative payoff charts, as well as swap diagrams are important information to retain.
Like Derivatives, Portfolio Management is another foreshadowing segment and should be in the ballpark of 5% of the examination.
The last chapter is Alternative Investments, which is additional 5% segment.
Concerning the test, as you work through the questions, answer the easy questions as well as the short questions first. Note the tougher questions and the more time-consuming problems and come back to them at the end. The key is not to spend 20 minutes answering one problem when you might be knocking out 12 others easier questions. Note the difficult ones and move onward. Ultimately, you will perhaps need to make a few guesstimates; this is normal so do not get worried out. Time management, as well as being cool-headed are the two intangibles that will aid you get the passing grade.