Not Dead Yet

For a chronological index of my path to the CFA, click here.

Can’t believe I did it.

As of a few minutes ago, I can officially say that I’ve read all chapters and worked all problems from all six Level One CFA study guides. Now I have roughly 40 days and 40 nights for review until exam day.

I feel like I’ve finished War & Peace. Wait, Amazon only puts it at a measly 1300 pages and the Level One curriculum is more than twice that!

Many thanks to those who have written wondering where I’ve been and if I’ve given up. On the contrary, I’ve just chosen over and over again to use free time studying instead of blogging.

Old News
Been there…

Based on a little web surfing, the consensus seems to be that what I should do now is enter a semi-infinite loop of:

1: Take a practice test.
2: Review material of section where scored lowest.
3: Goto 1

That might be fine for Vulcans 😈 (minimizing error, how very logical), but it sounds painful – continual focus on the stuff that’s not fun. I’ve come up with an alternate review formula that I think will work better with my psychology. Wanna hear it, here it go…

Using a random number generator such as Excel or Matlab…

1: Pick one of the 76 chapters at random.
2: Pick a problem from that chapter at random.
3: Re-work and thoroughly understand said problem.
4: Goto 1

Not the most efficient use of time, but I get to (a) work some problems that I’m already good at (for positive feedback) and (b) review all sections simultaneously.

Does this make sense? Maybe not, but I’ve been bad about taking advice so far. After all, I’m still using the HP 12C instead of the TI BAII+ and I haven’t ordered a single third-party review product yet. Perhaps a failure on test day in June will jolt me out of my stubbornness.

The upside of putting blogging temporarily on sleep mode was that I managed to make it through all six volumes. The downside, I wasn’t writing when I hit some of the sections I enjoyed the most, which was in Volume 5 (Equities and Fixed Income).

I have so many underlined sentences from these readings that I should probably come back and touch on them in a separate post. But let me give a quick summary.

Regarding Volume 5: Along the way of reading some of the more popular value investing books, I’ve been given the impression that Efficient Market Theory has a stranglehold on academia, so I expected the same for the CFA program. I was wrong. Vol. 5 has extensive treatment of security valuation models and findings of numerous academic studies regarding when EMT holds, when it doesn’t, and what it takes to “beat the market”.

Regarding Volume 6: (Derivatives and Alternative Investments): Had a foreboding about this volume as derivatives are often described as “complicated” and “involving complex mathematics” and my poor little HP 12C just didn’t look up to the task – not enough special buttons with special Greek letter functions. But the material turned out to be a cake walk! Secretly suspect they’re saving the hard stuff for Levels Two and Three…

Was also surprised to find myself learning how to evaluate real estate in Vol. 6. The applications of Time Value of Money seem endless. And after reading somewhere else (an earlier volume?) about how semi-uncorrelated asset classes can all suddenly become very correlated when the market goes bad, it was neat to learn about gold’s special negative correlation properties.

Well I’d love to stay and chat but I’m off to work my first problem for the second time. Random number generator says it will be Practice Problem #2 from Chapter 51 (An Introduction to Asset Pricing Models).

So it’s back to the CAPM, eh? Someone want to tell me again why we’re studying this when the relationship between beta and rate of return seems to have disappeared since 1962?!

Update: I finally passed all the CFA exams and wrote an eBook about the program. If you’re interested, click here.