Passing the Chartered Financial Analyst (CFA) Level I exam is no easy business – only approximately 43% of the 50,000-plus candidates who take it in June or December pass.
Peter Mackey, the head of CFA examination development at the CFA Institute, manages a team of 23 people who develop the CFA exams, as well as the Certificate in Investment Performance Measurement (CIPM) and the Claritas qualification.
Here is his advice for passing the CFA exams:
Everything you will see on the exam comes directly from the curriculum that the CFA Institute provides. Look at the exam prep materials and study tips on the institute’s website thoroughly.
“A lot of candidates make a number of mistakes, for example, they rely on too many sources of information rather than focusing on the curriculum,” Mackey says. “It’s hard enough to master in the six months we recommend that you take to learn it.
“It makes it easier and fairer for our candidates, because we will only write a test question based on our assigned curriculum – they won’t get asked something outside of that,” he says.
In 2009 the CFA Institute changed all of its multiple-choice questions to have three answer choices, one correct answer and two distractors, instead of four choices.
“Don’t underestimate Level I; it’s going to be tough,” Mackey says.“
The morning session of Level I lasts three hours, with 120 multiple-choice questions, followed by a two-hour break for lunch, then another three hours to complete an additional 120 questions.
Level II consists of “Item Set” questions, one-to-two-page case studies of information about an institutional or individual investor, then six questions based on that case drawing from the curriculum.
“Level II is similarly structured, but requires a lot more reading, with 60 questions in the morning and 60 in the afternoon,” Mackey says.
The morning session of the Level III exam has short-answer essay questions that require candidates to make calculations. The afternoon is Item Set questions.
You have to write down your answers by hand, which presents a challenge in an age of computers. Practice writing for long stretches using a pen or pencil to exercise your hand and finger muscles.
“Most of us don’t write by hand much anymore, so the act of writing for three hours is tough,” Mackey says. “We encourage candidates to practice writing manually in the months before the exam.”
Don't focus obsessively on certain parts of the curriculum that you think will make up the bulk of the test while neglecting others.
"It's a dangerous game to try to figure out what’s going to be on the test, to the extent that you’re skipping chapters," Mackey says. "That's reducing the probability that you’re going to be able to handle the questions you’ll actually see on the exam."
Candidates are tempted to cram in as many last few hours of study as they can. But don’t sacrifice time usually spent on exercise, eating well or sleeping a full night for studying – especially in the days just before the exam. Consider putting in a request to take some personal time off work for review and rest right before the exam.
"You want to perform your best, and that means caring for your physical well-being as much as mental [preparedness]," Mackey says. "If your body isn’t ready, then hundreds of hours of prep won’t mean anything."
Scout the exam location ahead of time. Learn the route, look at parking, plan what you will eat for lunch and where, and have a general notion of what you’re going to walk into.
"You don’t want to be tripped up by little things like that," Mackey says. "The fewer last-minute decisions to make, the better."
Make sure you have your valid passport, ticket and approved calculator – and leave the personal belongings at home.
"Pay close attention to all the instructions provided to make sure you’re following the procedures properly," Mackey says.
For Level I, you have to complete 40 questions per hour, meaning you can spend an average of 90 seconds on each question.
An important point to remember is that there’s no penalty for a wrong answer, so answer every question.
“If you’re not managing your time well, you can really mess yourself up,” Mackey says. “You want to turn in a fully completed answer sheet to give yourself an opportunity to get credit for every question.”
Levels II and III get more complicated. Level III has 12-minute and 23-minute questions, many with multiple parts.
“For Level III in particular, it’s really important to focus on time management,” Mackey says. “Some people write us a treatise on a topic they know well but take twice the allotted time to do it.”
While you have to keep your eye on the clock, some people work too fast. There are a lot of key directions in the pre-exam instructions.
“Candidates fly into this without paying attention, they miss questions, misread them, or they don’t follow instructions and write on the wrong page,” Mackey says. “You have to calm yourself down and work at a steady pace without rushing.”
Some people tend to overthink a question, convinced that it’s a clever trap designed to ensnare unsuspecting saps, but they end up outsmarting themselves or taking too much time per question.
“Certain candidates have a view that every question is a trick – that we’re sitting here rubbing our hands thinking ‘How are we going to get them on this one?’” Mackey says. “Candidates can overthink or overcomplicate it by making an unnecessary assumption, ‘I’m sure these guys are trying to trick me,’ which can do more harm than good.”
Stress management is an overlooked element of test-taking.
“There’s good stress that can help you and bad stress – if you panic, it will hurt you,” Mackey says. “You’re not going to know all of the answers to all of these questions – nobody gets 100%; if you get 70% you’re doing pretty well.
“If you don’t know an answer, move on,” he says. “The brain is an amazing organ, and research has shown that if you calm down, answers will start to come to you more readily.”
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