One Simple Thing

Only about 1 month to go until exam day. Have I been studying?

Even at Disney World, people!

Truth is, while I have been logging a couple hours a day studying, I certainly have not put all other projects on hold in order to focus like a laser on only the CFA.

There are three problems with that approach:

(1) TVM
(2) J-factor Risk
(3) Regret Aversion

Let me elaborate.

TVM is the time value of… my time, a.k.a. opportunity cost. In addition to my beloved equities analyst consulting gig, I have a number of side projects going on too. You could call these my private equity allocation as most may not end up being worth the time & money I sink into them, but… you never know! Have you seen how I’ve been climbing the leaderboard for the $20,000 pot of moolah over at Kaggle?! Did you know I’ve sold almost 120 iPhone apps in the past 5 weeks (thanks to my wife’s media blitz)? That the blog has earned $13 in Amazon referral fees this month alone? That a Google Adsense check just arrived in today’s mail? That despite hate-hate-hating the clothes of a certain retailer, I turned a 30% profit in just a few weeks after my mad valuation skills (careful spreadsheeting of worst-case EPV) just forced me to buy their stock? And that I’m now 1 week into Stanford’s free machine learning class?

Give up all this? For more GIPS?!

J-factor Risk relates to my belief that there are Just a lot of other factors besides how much you studied that influence whether you pass or fail. These include how used you are to the testing format (it changes every level), whether you sleep well and wake up on the right side of the bed on exam day, how smart your fellow test-takers are that year (for the curve), and whether the material you happen to be good at is what they decide to test that year.

Regret Aversion is absolutely why I refuse to give my whole life over to studying for the exam. I have a strong aversion to possibly spending huge amounts of time preparing, later finding out I failed, and regretting the time wasted – so much so that I consider not continuing! Is it really true that 75+% of the 50% who passed Level III last year were there for AT LEAST the second time? With those odds, I should have just shown up, said hi to familiar faces, practiced an essay question or two to see what they are like, and vamoosed!

So I put in my teensy 2 hours per day. Then I have some chocolate, to make sure my brain continues to associate CFA study with pleasure (thank you Charles Duhigg).

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Well it would be unfair for me not to provide some insight into the mindset of the OTHER approach. Robert Baer, (quoting his downhill ski teacher) said:

“We all have to take risks in life, sometimes grave ones. Risk it all and you just might win. Hedge your bets and you never will.”

For a detailed description of how one guy DID NOT hedge his bets, and passed Level III on the first try (he did that on all exams) check out the link to Patrick’s story below. 407 freaking hours he put in for one year! I’ve only added 100 to my original 240 from last year!

How to Pass the CFA Level 3 Exam

And here’s another person with laser-beam-like focus on one goal, Diana Nyad, who is yet again this year attempting to swim from Cuba to Florida – probably about the same time we’re in our exams. Her conviction is contagious.

You only have to do one simple thing to pass all the CFA exams, or achieve any goal for that matter, and that is to never quit.