CFA Level I

Link: /5 mostcommon mistakes commited by CFA candidates

With in past few years, there has been a tremendous increase in the number of candidates appearing for CFA. Despite increase in number of candidates from new economy countries like Brazil, India and China, the passing rate for this exam, has not changed much. Though the mode of preparation, demographics, exam center environment et. al. changes tremendously with the countries. Giving it a thought, I have compile 5 most common mistakes people commit during the preparation for the exam. And, surprisingly, these are common for all the demographics.

1. Tests are for the end.
Many CFA candidates think that giving exam is a job to be done after completing the course. In reality it is not so. The CFA curriculum is so vast and encmpassing, that one can not possibly judge oneself after preparing all the modules. So, its real important to judge yourself after completing each of the modules to judge the shortcomings and solve them before moving to next module. This also helps retain the concepts for the longer time.
2. All is not to be done.
This is another most common mis-assumptions that candidates have. Studying 8 of the ten modules willnot help. CFa judges you sepeatly for diffrent topics, and absolute blunder in 1 or 2 of them can put you at the risk of failing the exam. If some of the topics are not of one's choice, do not make it spoil your hard work on the other. Push yourself to get the minimum passing marks(55% - 60%) in those topics. Not to be said, you have to make sure that you get some extra marks in your favourite topics to make up for it.

3. I know it all
Many CFA candidates with finance background tends to ignore the topics they think they know or "work on" on a daily basis. This should be avoided at all costs. CFA curriculum gets updated with each passing year and mostly follows on US-GAAP and IFRS, unless mentioned otherwise. So, if you are a candidate of some country other than USA, you run the risk of mis-calculating and mis-interpreting some of the questions. Moreover, with such encompassing curriculum, one cannot tend to ignore the familiar topics anyways.
4. Schweser is all I need
Though Schweser study notes is one thing you should have, ignoring the study material sent by CFA institute all together is a crime. Though the content of the study material is quite explanantory, but that makes it interesting and more easy to retai. Especially the examples and end-of-chapter questions can make some of the questions in the main exam a cake walk for you. And though again the common opinion, beleive me, lot many candidates comes to know about this after the actual exam.
5. 250 hours i.e 10 hours for 25 days. Easy.

Though mathematically it true, but for CFA thats wrong mathematics. First of all, most of the candidates appearing in the exam have confessed of taking more than 500 hours for preparation. And preparing with putting long hours in small number of days is no way to success. As I have mentioned, CFA tends to test you on all the nook-and-corners of the concepts used in the financial world. Hence, than giving consistent time spans for long number of days always helps to ragain all you studied. CFA is not an examto passed by burning the midnight oil few days before the exam. Its about clearing the concepts,understaing it usage in the real financial world and applying it in tandem with other concepts. And this needs consistancy of 150 days rather that of 150 hours.

If I want to calculate the 2*4 FRA rate for a forward contract given the 60 days and 120 days LIBOR rates what are the steps that I need to follow? What is the formula? I think this is different from interest rate swap. I should remember the clear difference between calculation of FRA rate for a forward contract & the fixed rate for an interest rate swap. Suddenly I head some noise. My roommate is pushing me and yelling at me“Abe uth exam nahi dene jana hain kya? Soya hi rahegaa kya?”. [Don’t you want to write your paper today? It’s too late. Wake up! ]. I muzzled my eyes and gave a hard look at him and I took a deep sigh. Thank God! It was a dream.

My CFA examination center was in Thakur College of Engineering, Kandiwali, Mumbai, India. Lot of my college friends (Daiictians) were also appearing candidates for CFA, Rohan Mathur from IIM-A, Vishesh Kathuria from JBMS, Aditya Jaisawal from IIM-I. So we all stayed together at Kathria’s hostel on Saturday night and revised important formulae which are in the list of probable.

Though it was not looking as a special day it was special for me because the hard efforts that I had been putting since 4 months. Anyways, we did our daily chores and left towards to catch the local train (Life Line of Mumbai) from Churchgate to Kandiwali. We started earlier, around at 6:30 am, to avoid any delay to reach the exam center. It was a very hot and humid day. Could you believe it? I was sweating at 7 am in the morning. We reached Kandivali at 7:15 and had a quick break fast near the local station. There were many auto rickshaws and taxis but either it was full or the driver was not ready to come to the exam center. After lot of struggle finally we got one. The center was around 4 km from the station. Hardly had we traveled 2 km, we saw a huge traffic block in front of a red signal. We thought that it will clear soon, but there were no chance at all. CFA candidates were just running on around the road so that they can reach on time. Hence we also decided the same, paid to the cabbie and walked along the side way.

Once I reached the center and saw a huge mob of around 8000 guys I was about to faint. The roads were blocks, gates were closed, and very noise environment & hot and humid temperature, all were just killing me. I thought that any how I have to enter and give my exam today so I also became the part of the mob and entered the center.

When I came inside there were no place where I can sit & relax. Many candidates were blaming cfainstitute for this kind of exam arrangement. They had many questions and complain like:

1. The large chunk of CFA candidates is from India and why in India there is only one center with 8000 persons? Isn’t this is a lack of miss management by management gurus.
2. We should file a complained signed by us in front of cfainstitute why they are so partial.
3. CFA candidates in other region get elite and 5 start treatment why aren’t we. Are we paid less for the enrollment or they paid more?
4. The job of cfainstitute should be to provide a better platform for future generation financial gurus not to earn profit from the examination fee.
5. The level II candidates were comparing the differences that what they got in level I and what they are getting here in level II.

Any ways I though to better proceed in my room. When I went near staircase, it was jam packed. I waited for some time but all went in vain. I started to move slowly up and reached on 2nd floor. My room number was 2C. There was one instructor in front of the gate. She told me to put my luggage in the clock room, and directed towards the room. When I went there it was a panic scene. The door was jam packed every body wanted to go inside and those who were inside wanted to come out. After lot of struggle I managed to go inside. There was no place to put luggage. It was a room of size 5m*5m, very humid and hot. There was a heap of luggage everywhere. I put it at some safe place and though it will be safe. When I came out from that room I was completely wet from top to bottom by sweating. I went to refreshing room to make myself relax, with the hope that everything will be fine after this. I entered into the examination hall. There was an AC in the room so I relaxed a bit and I was waiting for the paper.

At 9:00 O’clock, the bell rung. I had a look at the paper, made a strategy and started writing. It was going smooth in the start but after some time I was feeling tired because of the problem I faced today till now. Hardly had I spent an hour on writing paper, the lights were gone. From a shiny & cool hall it converted to very dim, hot & humid hall. I was frustrated now. I tried to concentrate on paper with the hope the light will resume soon. After 20 minutes the light came. I was sweating at that time. This is the worse exanimation experience I ever had. I looked at my watch I was behind by 15 minutes according to my strategy. I started to speedup and managed to finish my paper on time. But due to such distraction I definitely felt that I can perform better what I did. Anyways the 1st paper was over. I submitted my answer sheet and came outside.

I didn’t dare to take my cell phone from the clock room. I came outside proceed for the canteen. Oh my God! It was a queue of 200 meters. I smiled and thought if I am going to stand in this queue probably I will miss my next session. I went outside had 2 glasses of sugarcane juice and chips and then came back to the exam center. I was searching for my friends. Suddenly I saw him. I went there and asked “how was you paper?”. He told me “Don’t ask me man. It’s just over. I don’t know how it went. Isn’t the arrangement here is bullshit? It really affected my performance”. I smiled. They were looking at some formulae. I generally avoid it and so I refrained from it. They all seem to be very tired. They were complaining to cfainstitute for this kind of arrangement and were thinking not to put center in India again. It was 1 O’clock in the afternoon. We started to proceed in our respective rooms. I had a notion in my mind that I have to perform better in this paper to keep the hope alive for passing.

I entered in my room went to my seat lie down on my desk and relaxed. The instructor came and announced my roll no. I went at the podium and made my presence. The 2nd and final paper started. I had a full confidence that I can do better this time. I started with great confidence and so performed well. The relaxation before the exam & no distraction in between really helped me to perform better. I was done with my paper 15 minutes earlier.
Finally the exam is over. I was so happy that I can’t tell you. I was feeling like a free man with noting to do at least for some time. I called my wife and told her about my whole experience. She also complained about the miss-management, miss-arrangement and huge exam fee.

There is one old saying “Indians can manage/mold themselves with any condition easily” and so we did. But there are many questions which can by pose in front of cfainstitute.

1. Do they think they managed the examination well in India?
2. Is the idea of putting only one center in India was correct?
3. Are they aware of the percentage of Indian students appearing for CFA?
4. Did cfainstitute take proper care of Indian candidates? Aren’t they biased?

By Anonymous user
Writer was the candidate for CFA level II Jun. 2009

CFA level 1 exam is one of the most challenging financial certificate examinations. The toughness of the examination can be gauged by the fact that only 35 to 40 % who appear in the examination actually go on clearing it. So to approach the examination in a methodical way is the best thing any candidate would like to do first. To develop a method one should understand what actually is CFA examination and what it actually require to clear it. I am going to present some facts and observations about the examination.

1. Examination consists of approx 70% theoretical rest 30 % numerical.
2. 40 % of exams questions are fundamental based, 50 % are difficult and 10% are really tough.
3. Most of the candidates who fail, fails to score highly in Ethics and Alternative investment part of the questions.
4. You need to clear all the topics of the syllabus with minimum being 50% in all the topics. Though CFA institute doesnot mention that there is a topic wise cutoff but recovering from a low score in one topic is near to impossible. It is a better strategy to score atleast 50% in each topic and try to maximize in other topics.

Keeping these facts in mind follow the instructions mentioned below.

Develop a Study Plan. The very first is to have a detailed study plan covering each and every topic. Moreover pay more attention to problem solving. Most of the candidates I have met have missed out because they pay less attention to problem solving. One more thing to be kept in mind when you are developing the study plan is that many topics and LOSs will take more time than anticipated so always have a buffer time and periodically review the progress made.

Finish Early. Finish atleast 2 months in advance. After finishing the study once you will have to give periodic tests and based on results of these tests strengthen your weaker points. Finishing early will boost your confidence as well. Go through each and every LOS after you have finished once to gauge you whether you have understood that or not.

Never try to outsmart CFA I just want to say never think that this particular question has already been asked and there is a less chance of it being asked. Prepare thoroughly.
Understanding the concepts is better than memorizing it in CFA. They check your concepts not the memory. One fine way of doing that is: go through any financial news paper daily and try to understand the term and its implication (it helps that concepts of CFA is very practical and the terms you study during preparation will be in use widely). I followed it to have a very good impact.

By Kanishka Vatsa
Writer has succesfully passed CFA Level I in Dec. 2008.