My guide to passing CFA Level 1

I've posted this a few times as a reply to threads (and a few other forums around the interwebs) but thought I'd put it here too in case anyone finds it useful. I did the December 2014 L1 exam and passed. Here goes:

I don’t aspire to any absolute truth or saying that this is by any means the only way. What I did was *an* approach, not *the* approach.

First off I have to say that I had probably the one of the best backgrounds possible for going into the CFA exam as I had seen so much of the material before. I studied finance in university, with modules also in economics and quantitative methods. I worked briefly as a financial analyst in industry having seen capital budgeting/NPV calculations first hand. I’m now an auditor (hopefully not for much longer) at a Big Four and had 14 out of the 15 ACA (UK accounting qualification) exams under my belt when I walked into the exam room in December, meaning that I could do accounting backwards, forwards and sideways.

The only things I hadn’t really seen were Ethics obviously (though having done a lot of ethics as part of my ACA, I didn’t find it too challenging), statistics and bits and pieces from the other topics as well.

All this meant that studying was in some parts just refreshing my memory and not really brand new facts. Even on exam day I recall there was a question that I didn’t recall from the readings but I could hear the voice of my university professor in my head and that helped me work out the answer. I don’t wish to discourage anyone with a non-financial background but I can’t overemphasize how much a relevant background helped me.

So how did I prepare?

I registered in late June/early July or thereabouts. It was around then that I also started reading through the Schweser notes. I didn’t read everything in detail and I did not do the end of chapter questions at that point. It was more to get familiarized with the material. In some places where I felt more confident I just read the chapter summary and the accountancy sections I pretty much skipped altogether. I read the Schweser notes only once. Also did a bit of the CFAI materials end of chapter questions. I would not read the CFAI books as such since unless you have a lot of time to kill, they take up too much time. Schweser delivers the same material in half the amount of pages.

Following that my accountancy exams started picking up as I was sitting the Technical Integration papers of the ACA in early November. As such I shelved the CFA books until that was over. Come the 4th of November I sat my last ACA exam and that’s when high gear kicked in.

I had taken 3 weeks off work before the exam (not all consecutive, but that was the gross total) so that I could concentrate purely on my studies. I started off with the CFAI books and did ALL the end of chapter questions (EOCs) from them. I did very few Schweser end of chapter questions as I found them to be (later proved to be correct when I sat the exam) much more long winded and not as direct.

The way in which I did the questions and which I think is good for learning the concepts is to look at the answer straight away after doing it yourself, instead of running through a set of questions and then reviewing the answers. That way the concept being questioned was still fresh in my mind and I could learn it immediately.

After I had done all the end of chapter questions, I moved on to the Schweser mocks of which there were 6. I started working through them in the exact same way I did with the EOCs: did the question and looked at the answer immediately. This is where I also introduced a new thing: I started taking notes of the things I got wrong and organized these via topic. I wrote down the concept that I didn’t know when I got the question wrong and then later went back to review these. I did not do the Schweser exams to time, generally was doing one a day when studying. I also had a formula sheet on hand all the time, I think the Schweser one is pretty good. I would refer to this continuously to help drill those formulas into my head. At this time I saw no point in testing my memory of formulas, I was there to learn and as such I did the exams essentially open book.

Speaking of formulas: there wasn’t actually all that much calculating that needed to be done in the exam. Some formula collections might look dauntingly long but in fact there are just a few key ones you need to know and much of the rest are just common sense or derivations of one another.

Once I had done all the Schweser mocks, I had a look at the topics I was weakest in (based on the notes I took) and used the Schweser Question Bank to really drill those down. The QB questions are quite simplistic, even simpler than the real exam in some cases, but they are good for learning specific concepts as you can drill down by learning outcome statement/topic to find the very thing you need.

I then did the questions on the CFAI website that are provided to you when you join up. Here the answers are presented only at the end so I reviewed them then. Again making notes of what I didn’t understand.

Once that was done I moved on to prior year CFAI mocks. I later realized that this was a slight error as many questions repeat themselves so if you want to sit the most recent mocks fresh (you are provided 2 through the CFAI website when you sign up) then better leave those for later. Again I did these not to time and looking at the answer straight away after as well as making notes of concepts I missed.

Once all that was done, I finally did the CFAI mocks that I got when I signed up. These two were the only ones I did to time, under exam conditions and without looking at my formula sheet/notes I made. These I did on the Monday-Tuesday before the Saturday exam. Once that was done, I spent the last few days just reviewing the answers to all the CFAI mocks, looking through my notes as well as the formula sheet.

I think the CFAI mocks (more so than the CFAI EOCs) were the very best representation in terms of style and difficulty for the real exam. The questions are very straight forward and there was nothing tricky. I finished both the AM and PM sessions in about half the time allocated. I didn’t study much during the break, just ate, relaxed and talked to a few guys I knew who I randomly ran into at the exam hall (took this in London so finding them out of 4k or so candidates was quite the fluke). Although you must focus and work fast, I can’t say the exam felt too time pressured. Very few questions were ones where you needed to do longer calculations. Many could be answered within 15 seconds. But do go back and review what you have put down.

General tips:

*When answering the questions, make sure you read carefully what they’re asking you. Make sure you pay attention whether the questions says **most** or **least** likely. I got so many answers wrong in my mocks because I read it the wrong way around, not because I didn’t understand the concept. Also try and eliminate answers that are clearly incorrect so you’re left with the more reasonable ones and a higher chance of getting it right.

Know your calculator well. I went tor the Texas Instruments one. Once you get the hang of it, all those time value of money questions will be some of the easiest points you can get.

Always keep your eye on the topic weightings posted on the CFAI website. Use this as your guide when allocating time to different topics. There are only 8 Alternative Investments questions so no need to go nuts over such a small area.

Do not, I repeat do not get bogged down by any one particular concept you don’t get. Read it again and if it doesn’t help, just flat out memorize it. If that doesn’t help then just move on. They say Level 1 is a mile wide but an inch deep and it is very true: you need to know a lot of topics but on a very superficial level. Don’t get some small thing? No worries, chances are it might not come up anyway and if it does, just take your chances.

They say 300h is the magic number of study time to aim for but I think that is only really relevant if finance is new to you and you’ve not even seen an income statement before (in which case it might take even more than that). If you come from a relevant background then it’s really not that bad at all. For those final three weeks of preparation I was probably starting at around 9:30 and finishing at around 7:30 or so, less gym trips and meals (and browsing reddit) in between. I worked hard but I can’t say I was slaving away or doing all nighters. If I had to guess, I’d say my study time was in the 150-200h range, give or take, but I really didn’t count. The last few days before the exam I was taking it easier and not trying to stress myself out.

However as emphasized before I could not under any circumstances have pulled this off like this if I did not have a relevant background to help me. FRA, the biggest topic, was a relative breeze for me coming from a background of chartered accountancy.