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 ๐Ÿ˜ˆ (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.

19 thoughts on “Not Dead Yet”

  1. Thought you completely forgot about the blog but it is understandable considering your situation.

    Here is a general comment about your approach. I don’t think going out and following someone elses plan is a good idea. Taking a glance through the internet will yield plenty of study options and the only correct option, in my mind, is a hybrid of all of them which tailors to each individual.

    So I agree with you because you are taking your own approach to the studying of the material. But, I would recommend you to take some time and actually sit down, with a clock/timer, to take 1 or 2 practice tests. This will allow you to really feel the pressure and create a similiar scenario you will be facing while in the CFA exam room. Creating a time limit and forcing yourself to live my the CFA exam guidelines should somewhat prepare you for the exam. In my mind, nothing will completely prepare you for the exam unless you have the actual exam before the CFA exam date.

    Here is what I do when studying for anything.
    1 – Read Material while taking notes
    2 – Do problems after reading each chapter
    3 – Review all material
    4 – Take a practice test or past test
    5 – See what went wrong and go back to review/re-learn material

    This is what works for me.

    Good luck with your studying. By the all the info I read about your time with the CFA material, you’ll be fine.

  2. I’m glad you finally posted again. I’ve checked for a new post every couple of days for a really long time now. I was happily surprised by this post. Good luck with exam!

  3. great to see you are writing again. haven’t seen “GOTO” statement for a while ๐Ÿ™‚

    it would be interesting to put some weight on different chapters, because the exam itself is not equally weighted. The FSA part is heavily tested.

    would you want to try to use “weighted” random number generator for problem set generation?

    Good luck! (to both you and myself)

  4. Yellowman – great feedback, thanks. Yes practice tests are definitely in the near future and that’s a great point about working under time pressure. Re: passing, I have indeed put in a good amount of time studying and could easily explain this stuff at a hand-waving level correctly to someone else. But at the detailed, calculator level – not so sure!

    Amanda – thanks for the kind words!

    Jay – I tried writing it in pseudo code C but the editor kept removing my indentations making the code look strange. Was forced to use text and GOTOs! You make a good point and we both came to the same conclusion about weighting but for different reasons. I don’t know what %’s the different sections are weighted on the exam but do know that picking one of the 76 chapters at random isn’t fair b/c they aren’t all the same length.

    Looked at this way the individual volumes should be weighted:
    I:19% II:18% III:25% IV:19% V:10% VI:9%

    So I think step 1 is to generate a uniform random number (x) between 0 and 1, and choose one of the 6 volumes this way:
    if x <= .19, Volume I if .19 < x <= .37, Volume II if .37 < x <= .62, Volume III if .62 < x <= .81, Volume IV if .81 < x <= .91, Volume V if .91 < x <= 1.0, Volume VI Then proceed to pick a chapter and problem from that volume at random. Was also thinking that my current formula of working problems might not be adequate if the problems don't cover all the material, but just a sampling. In other words, it might be good to also pick pages at random and read whatever section it puts you in the middle of. Thanks for the comments everyone! So nice to get feedback. ๐Ÿ™‚ - Lumilog

  5. I’m currently getting around 60% on my exams – they take me about 2hrs 15 minutes. I’ve got 4-5 weeks to get that up to 70-75%! I@m still struggling on FSA (especially leases) and I haven’t really looked at ethics that much bit I’m planning of cramming that in my final week (hopefully it will bump up my score). Economics seems fine if you have the time to work through the questions (which I do i think). Derviatives and alternatives also seem okay. I’m up and down on asset valuation.

  6. Hey he’s back. you seem to be on a good pace. your hard work will pay off. keep at it.

  7. Craig, ethics is a huge part of the CFA program. You might want to consider focusing on this part of the program. With all the scandals in the financial world ethics is playing a huge part in any financial course.

    I have spoken with a few people who passed all three levels and they have all told me they didn’t do so well on the calculation questions but killed the ethics part. What they told me was, anyone can manipulate an equation and a set of numbers but not everyone can follow proper ethics.

    With all the negative financial stuff happening these days, the world needs more people who will follow proper ethics.

  8. Good advice,

    I’ve currently hit rock bottom. I’m doing even worse on the mocks and getting more confused with all of the numbers spinning round in my head.

    FSA and Ethics are the key.

  9. Guys, good luck for the CFA. I passed the first level in Dec, 2007. But I forgot most of the stuff. I think, while passing the CFA is good, the CFA only gives you an intuition about how things work in finance. I feel a strong urge to study financial engineering in the US from this fall. I am sure that it will be much more fun than the CFA.
    Anyways, how about a little useful information for those who are preparing for the first level? So, here it is. I’ve used Analyst Notes (www.analystnotes) and Schweser, and some softwares (Stalla, etc.) In my view, the most useful was Schweser, the second best were thos programs and the last analyst notes. I am not advertising or de-advertising (haha, i wonder whether there is such a word) anything, since I don’t gain anything from doing so. My ranking is based on question types that appeared on the exam. Those questions involved two or more concepts at the same time. When you study Schweser notes, you get the connection between things, but analyst notes sucks in this sense. Even topics don’t appear in the same order with the syllabus.

  10. Hi.

    I am also an engineer (software). I have been investing since 7 years and now doing my MBA in Finance. Signed up for CFA for Dec 08. will be following ur blog.good luck

  11. Craig / Yellowman – operating / capital leases are giving me headaches too. I’m working as many problems as I can in random order and am learning more and more, but there are only 2 weeks left! Wonder if the CFA exam questions are as hard as some of the reading’s practice problems.

    Thanks for checking in itconsultant and good luck. The MBA will no doubt give you a head start.

    Bahodir – thanks for the advice. My guess is that I will be re-taking the exam in December and, if so, will most likely get 3rd party notes. I am intrigued by financial engineering programs too – just like the fact that you can pursue the CFA while still holding your full time job (at least theoretically).

    – Lumilog

  12. I will fail in June and I don’t think I’ve got it in me to retake it.
    Even if I pass, I don’t think I will take Level 2. A shame, but I need to have a life! If I’m not revising (and having recently started watching The Wire, I’m not revising!) I’m thinking about it. I just feel exhausted.


  13. Hi to those who will fail the June exam,

    I will fail the June exam too. I just never learned to manage time wisely. Let it be a lesson to myself. Next time I’ll have to find a study partner to keep me on the track. (sounds like back to college years again….)

    Hopefully I’ll learn the lesson to pass the December exam. Ya. Wait until xmas.

  14. For all of you who are afraid to fail, don’t be! Forget about passing or failing the CFA test and just focus on the exam itself. Think about how you are going to attack questions and how you are you going to re-focus during the exam when you seem to get side tracked.

    Lumilog – GOOD LUCK! It was fun reading your blog. I hope to hear some good news from you when you get your results. ๐Ÿ™‚


  15. hey, how about telling us what success percentage you got ?
    I got 68%, so I want to know is it good enough, I’m always near 70%, hard to pass it.

    what about you ?

  16. I find the hardest topics to be:

    – operating/capital leases
    – capitalizing/expensing interest
    – some of the ratio question related to operation/capital leases, and ARO and write downs

  17. Hey thanks for all the comments. Yes, Judgement Day is well-nigh upon us. Gonna try to get one more blog entry out before Saturday. ๐Ÿ˜•


  18. Just cleaning out my ancient bookmarks. Great Read! There was a guy, back when I was taking it (~2000) named ‘Dugan’ (Dennis?), whose site eventually turned off. It featured, among other hilarity, a multi-colored, flashing, over-sized font “CFA” business card. He may have bowed to “pressure”. Some reading this may remember taking comfort in a similar way.

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