What is the best way to pass the CFA Level 1 Exam?

What to Expect on Level 1 of the CFA Exam

For a candidate to succeed, the CFA Institute recommends that they study for a minimum of 300 hours for each level. And, in order to do so, one must have a complete comprehension of the themes, which cover over 3000 pages and are each explained in great detail. The essence of each topic, from "already covered in undergraduate" Equity / Fixed Income / Economics to "detailed-oriented" Corporate Finance / Quant / FRA to "basic yet core stuff" like Ethics to "specialized fields" like Derivatives and Alternative Investments, is beautifully set-forth in the Learning Outcome Statements, which gives a clear broader picture of what the candidate is expected to.

The disadvantage is that reading so many pages in such a short period of time, especially if you are working full-time, can be a difficult chore. Third-party preparation providers step in to fill the gap between limited time and developing knowledge. They condense down the curriculum into easily digestible chunks while yet ensuring that the candidate has the amount of in-depth information required. The video lectures assist in properly conveying the topic to applicants without the need to browse through multiple pages of the curriculum. However, using a third-party prep provider as a supplement to your study plan rather than as a replacement for the study material is encouraged.

How to Prepare for the CFA Level 1 Exam

To pass each of the three levels of the CFA, an excess of 300 hours of study (excluding revisions and mock exams) is necessary. However, the majority of candidates suffer from the planning fallacy, in which they overestimate the amount of hours needed to finish the curriculum. It is suggested that you begin studying at least six to seven months before the exam date. This will ensure that each of the ten topics is thoroughly studied so that the principles are ingrained in your mind. However, many individuals complete Level 1 studies in 2 to 3 months. When compared to a candidate who has studied for 6 to 7 months, the diversity of knowledge will be obvious. The emphasis should not be primarily on passing the exam, but rather on mastering the topics. This will help you lay a strong foundation for future levels and your career as an Investment Management expert.

CFA Level 1: What You'll Learn

Let us now discuss the relative relevance of themes in Level 1, both in terms of their use in Levels 2 and 3 as well as their value in providing you with the appropriate instruments for investment evaluation.

Ethics

The CFA Institute places a strong emphasis on ethics, as evidenced by the fact that it is the only topic that appears in all three levels with a consistent weightage of 10 to 15%. The fundamental reason for this is that the investment management sector is built on and revolves around trust, and those who work in it must be morally aware of their actions and the impact they have on their clients, employers, and the industry as a whole. This is one area that, if thoroughly studied, can improve your score and even tip the scales in your favor if your exam score is comparable to that of other candidates (the latter part is very speculative but the CFA institute has occasionally hinted about this).

Corporate Finance / Economics / Financial Reporting and Analysis

If you have or have had a finance degree, you will find these concepts to be quite simple. Candidates with a non-finance background may struggle at first to grasp a few concepts, but after the fundamentals are grasped, these topics should be very straightforward. The total weightage of 35% reveals the relative importance of these three themes.

Quantitative/Equity/Fixed Income

These are the foundations of the investment world as we know it. It's critical to understand how it works, how it's structured, what investing tools are available, and how useful it is. The topics covered in this level lay the groundwork for your knowledge, which will be put to the test in Levels 2 and 3. Each subject is equally weighted in this section.

Alternative Investments and Derivatives

The current coverage of specialist segments in the Investment Management industry is at a wide level, a general introduction to gain a basic knowledge of the concepts. Although these two portions have a low weighting, if completed thoroughly, they can help you improve your exam score.

Management of a Portfolio

Portfolio Management is the process of bringing everything together and providing real-world application skills. The importance of this topic is not reflected in its weight (the same topic has weightage of 35-40 percent in Level 3). Although this is a relatively simple topic, it is highly advised that you grasp the core concepts here for simpler memory in tests and subsequent levels.

Final ideas...

Candidates frequently complain that Derivatives, Economics, and Quant are the most difficult topics on the exam. To avoid ending up in the same boat, it is recommended that, in addition to studying materials, you try to tie the principles to current events (with the advent of the internet, no information is out of your reach, you just have to search for it). You will gradually be able to determine your areas of strength and weakness as you begin your study sessions. Knowing what you know is crucial, but knowing what you don't know is critical since it allows you to choose the best method for closing the knowledge gap. And keep in mind that you're not simply studying for the Level 1 exam; you're seeking to be the best in the Investment Management sector worldwide, which requires time and work.