Engineers and the CFA Program

I occasionally get good questions via emails and comments that call for somewhat longer replies. It only recently dawned on me that these should be made into posts so that others can easily stumble across them. So here’s the first…

July 17, 2011 at 5:47 am

Hey Lumilog,

I think i find myself in exactly the position that you described yourself. I have a lot of interest in stocks, I have been trading from past 2-3 yrs with whatever experience i have gained over the time with my own investment style ( I can call it neither technical or fundamental ).

I keep reading stuff related to investment and trading, so i too sometimes think as you wrote “it couldn’t hurt, and I was spending so much free time reading about investing anyway that it made sense to do it in the CFA program framework where I’d have something to put on my resume for all my efforts.”

I have some queries which are bugging me from a long time, I hope you can provide some insight into it.

1) How much sense does it make for me to use my time by reading CFA stuff than by using the same time on my stock research.

Ideally it would be half and half, though in reality preparing for a CFA test and working leaves time for little else. The big advantage of putting your own research on the back burner while pursuing the CFA is that the program will provide fresh insights and directions for your future research as well as force you to cover interesting topics that you may have (a) never even known existed (b) thought you understood deeply, only to discover you’re quite the novice and (c) knew existed but never would have studied on your own, despite their usefulness, because they didn’t line up with the particular slices of investing that you’re passionate about.

2) Will all the effort in clearing the CFA exam actually makes you a better investor / trader. Or Am I better of doing my own research in the same time. ( I mean, i can devote the same time to other studies of stocks, read about their businesses or study the historical data etc etc )

Hard to say but I think the main vote for the CFA program here is that it’s just a more efficient way to learn as you can read a passage in 10 minutes that has conclusions it may have taken you months to discover via simulations or trial-and-error on your own. You risk wasting time re-inventing the wheel if you don’t get at least a good overview of what other great minds have discovered over the past 100 years. But on the flip side, you probably do risk becoming so indoctrinated by what you learn that it might reduce the degrees of freedom of your own personal research, as you may feel you already know the “correct” way to choose a discount rate, asset allocate, value stocks, etc. But didn’t attending university for 4 years for your engineering degree make more sense than just spending 4 years studying engineering topics on your own?

3) I am an engineer, And I plan to leave my current job and earn my income wholly on stocks.. Finally, want to be a money manager. So, Will a CFA help me in getting into any investment related job ( am an engineer).

The CFA certainly can’t hurt. I heard from a couple of sources a few years back that engineers didn’t really need much more education to break into finance since the math & statistics skills made them instantly attractive to Wall St – at least for an entry position as a quant. Becoming a portfolio manager by contrast requires some additional skills beyond just math, and the CFA should help here.

4) I belive, CFA must have been quite easy for you since you would be aware of some investment related stuff even before preparing for CFA. Am i right?

No. I thought I was pretty advanced when I started page 1 of the Level 1 study guide, but with each passing chapter the more my Advanced Quantitative Investing System I’d developed over the previous years began to resemble Collection of Mickey Mouse Metrics that had all sorts of holes and problems I’d never even thought of. I had (and still have) heaps to learn, and my previous self-guided research maybe gave me a head start on 5% of the material. Max.

5) I am an engineer and i dont plan to do any MBA but still want to be in IB field. In this case, will CFA help me?

Again about all I can say is “it certainly can’t hurt and most likely will actually help”. Even if you forgot all the material within a month after finishing the program, just having completed it sort of brands you as a Really Smart Person and that alone can open all kinds of doors – maybe even additional ones in your current field if you’re the lone engineer who can have an intelligent conversation with the CFO at the watercooler when none of your coworkers even understands what (s)he really does.

Thanking you in advance.

Thanks for the great questions. More please!

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