Preparing for the CFA exam (all levels): A General Study Guide

The CFA program is a rigorous set of exams that not only stretches a wide range of topics, but also challenges the test taker on the intricate details of each - it’s a mile wide, and a mile deep.

The topic areas include: ethics, quantitative methods, economics, financial reporting and analysis, corporate finance, portfolio management, equity investments, fixed income investments, derivatives, and alternative investments. Once you decide to enroll in the CFA program, the CFA institute will mail you a stack of books that is almost more overwhelming than the exam itself. It is not uncommon for students to use the CFA program’s material to prepare for the exam, however, many students will purchase additional third party software. The software is expensive, so I recommend reaching our to your employer or another sponsor to see if they will purchase it for you. The main benefit of having third party software is the question bank that comes with it. The CFA curriculum comes with about 200 questions and a few practice exams, third party software will come with 3,000 – 4,500 questions (depending on the level) and several practice exams. It’s really important to get through as many practice questions as possible, which is why I strongly recommend purchasing third party software. An additional benefit of purchasing third party software is they will also provide CFA review material that is a condensed version of the CFA curriculum. This is a more efficient way of getting through the material. Anyway, without further ado, here is a quick guide to preparing for each level (with the exception of the written portion of level 3):

Step 1:  read the material! Skip ethics!

About 5-6 months in advance of the exam date (the sooner the better), begin reading the material (either the CFA curriculum or the third party material). The CFA material is broken down into 10 sections. Each section has multiple subsections. The first section is ethics and professional standards. I highly recommend skipping this section at the start and saving this for the few weeks leading up to the exam. The ethics and professional standards section is all memorization, so there really isn’t much value in reading this material too far in advance of the exam date. The second section is quantitative methods. This is a good place to start since it is the second section, but really, you can begin reading whichever section you would like. The key to this initial reading is to just get exposed to the total breadth of the exam. So, read through each sub-section, take a quick 5-10 question quiz, and move on. Do this until you have completed reading every section with the exception of ethics.

Step 2: go back through each section thoroughly with a fine-tooth comb

This time you will go back through and reread each section. However, now you want to focus your attention on the sections that have the highest testing weight. For instance, the Financial Reporting and Analysis section for level one makes up roughly 20% of the exam, while the Alternative Investments section only makes up about 4%. Therefore, begin with Financial Reporting, then Quantitative Methods (12%), Economics (10%), Equity Investments (10%), Fixed Income Investments (10%), Corporate Finance (7%), Portfolio Management (7%), Derivatives (5%), and finally Alternative Investments (4%). After re-reading each section’s sub-sections in detail, hammer out questions! Aim for 50-60 questions within each topic. If you’re scoring below 70%, go back through the questions and get an idea of what you’re struggling with. Re-read this material, find additional resources online, or consider hiring a CFA tutor. By the time you have gone through all 9 sections, you should have 4-6 weeks until the exam date.

Step 3: hammer out questions!

It is now 4-6 weeks before you exam, and all you should be doing at this point is questions! Questions, questions, and more questions! This is why purchasing third party software is a great benefit because they come with a test bank of 3,000 to 4,500 questions. During this 4-6 week period I recommend doing 120-180 questions a day (sets of 60). The software will allow you to create mock exams and all sections included. Take notice to what areas you are struggling with. Review these areas, consult additional resources online, and again, consider looking for a tutor if things aren’t clicking.

Step 4: review ethics!

About 2 weeks before the exam date you should start reading ethics. Just like all the other sections, read it once through first, then go back through a second time and really focus on the intricate details. The ethics section is much different than the other sections since it mostly a set of ethical standards, and investment performance standards. My best advice here is to make some flash cards and do your best memorizing.

About the Author

Tyler, a senior MyGuru CFA tutor, has an undergraduate degree in accounting, a M.S. in Finance, is a CPA, and is also a CFA (obviously). He is currently in the process of getting an MA and eventually a PhD in Economics.