CFA Candidate Diary

Post Game Review

2010-06-17T08:19:00.000-07:00

Well, it's taken several years, but I am now done taking level 3. When I dreamt about this summer, I thought I would be on pins and needles for 3 months waiting for the results. I didn't think that I would be taking MBA classes at the same time. Right now, I'm just happy to be done. I don't even now when the results will be out. They probably sent the email, but they sent it to my tertiary email account and I can't be bothered to check it more than 2 or 3 times a month.

Anyway, the test was actually not that bad. I think I might have done average on ethics, but always think that. Last year I got in the right hand on ethics (which is probably why I passed) and didn't think I had done particulary well at this point. Derivatives were tough, and between the various futures, indexes, and other minutae, it was about 20-25 percent of the exam. I think I muddled my way to about 50% on all derivative questions. Everything else, I feel pretty confident about. I missed very few calculations that weren't derivatives (and got some of those as well). I was expecting much worse from the essay questions, but they were decent overall. The essay section was only the second time ever in a CFA exam that I was running out of time. I had enough time to finish all of the questions, and then enough time to flip through the book to confirm I answered them all before time ran out. The main reason for that was that I managed the time poorly. I treated the questions as essay questions, and they were actually short answer. I tried to give too much detail on some of the lower point questions so by the time I got to portfolio management I was only able to give the right amount of detail. Of course, the PM questions were worth the most points as I expected.

All in all, derivatives are the key. The higher I did, the more likely I pass. I had said before that if I failed this, I would take next year off. After seeing the real thing, if I fail, I proably won't take it next year, but I will consider it.

I deserve to fail.

2010-05-28T07:44:00.000-07:00

If you ever have the chance to do an accelerated MBA program, while preparing for a first attempt on a CFA exam, while commuting 4 hours per day, I would advise you not to do it. My ideal schedule during the week is as follows. I wake up at 5 am. I am on the road by 6 in order to make it to class by 8. First class is over at 11am (each class is 3 hours long). Then I have roughly 90 minutes for lunch before the next class. The second class is done by 3:30 which gets me to pick up Jordan by 6 pm. Then I have to get Jordan to bed by 8 pm, and walk and feed the dogs before inhaling dinner for myself. Do the math and that means I get about 90 minutes during the day where I can lunch and study. Maybe another 30 minutes or so at night before I go to bed. That assumes that I have no group assignments during the week - which I do. This isn't a blog about MBA programs so I will simply say that I haven't been able to devote the time I had budgeted to review though I have been able to devote some time. If I can't meet my own standards do I deserve to meet theirs?

On my practice tests I have come pretty close to passing, getting aroun 60%. That leaves me about one essay question and one item set from a likely passing score. I have been doing poorly one ethics during the practice so if I improve there, that might be good enough. Thus far I have been relying on Schweser for my practice exams, but that ends this weekend. This weekend I am taking a mock exam offered by CFAI for the item sets. For the essay portion the CFAI has posted the actual essay questions from the previous 3 years on their website and I have intentionally been avoiding the 2009 questions in anticipation of this weekend. If they are heavy on the early sessions and light on bonds and derivatives, I should be able to do well. I will update at least one more time before the exam.

My schedule admittedly was built in with a little cushion in proficiency, but the point is that now I can't

The Weather is Hot and the Pressure is On

2010-04-30T02:49:00.000-07:00

Well I have finally finished all of the learning for Level 3 and the entire cirriculum. Now all I have to do is demonstrate a third of it in a month. This is actually my favorite part of the entire process. I don't have to learn a lot, I just get to review and work on practice questions. Of course this year is special because my next step is to start reviewing on the very first day that I am an MBA student. I am going to face hell over the next month.

Before I begin though I am going to take my first full length practive exam today. I actually don't expect to pass or even do particularly well. I haven't really reviewed a lot yet so the goal is to just try and get a baseline so that I can track my performance and hopefully improvement over the next month. I will keep you updated on my score in a few days.

T-minus 10 days...

2010-04-21T07:04:00.000-07:00

I apologize for not posting in several months, but I have been busy so I wrote several posts in Word but for some reason, the computer won't let me copy and paste text.

Anyway, I am now on my last study session on measuring investment performance. Not surprisingly, one of the last sessions is one of the most difficult. Part of the reason is that it isn;t as intuitive as some of the others. Most of the others build on things from previous levels. This doesn't, so I'm not expanding my knowledge base in a particular area. On top of that, it's warm out which makes every fiber of my being want to review. I learn when it's cold and review when it's warm. When it's hot I wait for the results. On top of that I begin my MBA program in 12 days, and the anticipation is absolutely a distraction.

10 days from now will be a red letter distraction. I will have completd session 17 and have officially learned everything that a CFA charterholder is expected to know. I must still spend a month on review and then demonstrate that I have the knowledge, but it will be nice to say that I will have completed the education. I'll probably celebrate by getting a chili dog.

Almost halfway done

2010-01-20T04:39:00.000-08:00

Today I am finishing up study session 10. It was on bonds and how they relate to portfolio management. Everything has to do with portfolio management in level 3. I understand how it makes me a better all around analyst, but I much preferred asset valuation in level 2. I have finished sessions 4 through 10 now, which is 7 of 18 total. Next will be two sessions on equity.

These last two weeks I have really gotten into the swing of things. I easily surpassed 15 hours last week and I am test ready on session 10 and 8. I have even made laminated copies of the formulas thus far and put one in each car and a copy for the house. I got in 3 hours of studying on Monday and 90 minutes this past Sunday. That 90 minutes is pretty amazing considering the playoffs were on. Divisional weekend is in my opinion the best sports weekend of the year and I made time to study both days. I mentioned the formulas above. There actually aren't that many. There are several dozen thus far, but noticeably fewer (and simpler) than at level 2 in my opinion.

Part of being a candidate for me is the emotional roller coaster. Some days I feel really confident that I can pass and then I mess up a particular reading and I'm convinced I will fail. The confident days don't have anything to do with results. On the two days I have passed the feeling was relief, not joy. Anyway, I have been feeling really confident for the last couple of weeks. I am really starting to feel test ready. I just purchased some practice tests from ebay so I will update in a few weeks on how prepared I really am.

Holiday season? What holiday?

2009-12-08T11:50:00.000-08:00

It is weird that I am so far into my studying while listening to Xmas songs on the radio. As mentioned before I have finished sessions 4 and 5. I have also now finished 6, will finish 7 tomorrow, and will finish 8 before I take off the last 11 days of the year. That's 5 of 18 sessions before new year's. I don't want to make it sound like it has been easy - it hasn't. The thing that motivates me the most when studying is hate. I get mad at people who have wronged me in the past, companies that haven't called me for an interview despite being underqualified, qualified, and over qualified for a position (I'm talking about you Target. How many years of accounting experience do I need to run a cash register?). Being unemployed has left me bitter and mad at a great many people. That helped me study last spring.

The problem is that I got some pretty good news in mid November that left me pretty satisfied with my life for a few days. On top of that thanksgiving was fun. That left me short on hate right when I was working on study session 6. I don't need to go into too many details except to say that someone close to me helped provide me great motivation by joining the hater list. That made session 7 go by real easy. So easy in fact, that I have been able to review session 6 as well and am now caught up with where I want to be.

What could make my life bearable for a week despite being unemployed for a year (other than my 2 year old son who is the light of my life)? I was just admitted into the MBA program at UF with a full tuition scholarship. All I have to do is keep a roof over my family's head without being able to have a full time job because classes are taught during the day. That made me happy, but now I have to buckle down. The program begins in April 2010 - roughly 6 weeks before the exam. That means there will be a month where I have to be a full time college student and a CFA candidate during crunch time. Luckily, the early MBA classes will be on subject I learned as an undergrad so I should be able to survive the month from hell. The bigger problem is that if I fail 2010, then by 2011 I should be nearing the end of the MBA program and may even have a job. I definitely won't have enough hate to pass that exam. That means if I don't pass 2010, then in order to pass the level 3 exam I will probably need to get motivated despite having a job, decent credit, and no hate. I will have to be motivated on some positive crap like improving myself or the quest for knowledge. I can't take that risk.

I am going all out for the 2010 exam. I will finish going through all the cirriculum by the time classes begin, but I'll still have to review. I have come to the realization that because there are fewer readings in level 3 I don't need a full 10 days for a study session. So I will have a primary study session for each 10 days and a secondary one to review. For example the next 10 days I will learn session 8 and if time allows, review session 4. This has the added cost of ensuring less free time, but the added benefit of keeping the material fresh in my mind. I will update again at the New Year, but for now it's full speed ahead on session 8, asset allocation.

IPS intensity

2009-11-16T06:27:00.000-08:00

First of all you would expect that a level 3 candidate would not exhibit such astounding levels of stupidity. Due to financial reasons I haven't enrolled yet for the 2010 exam. As a result, in order to prepare for the exam I bought the materials for the 2009 exam at a pretty deep discount on ebay. I always tell people preparing for the exam that the key is to follow the LOS. So of course I start with study session 4. As part of my studying I spend a full day and a half becoming proficient on a difficult reading that isn't in the 2010 cirriculum. I now know more about trusts than I will ever need to know - probably.

As I mentioned I decided to start with SS4. The first 2 are ethich which I am probably going to do either at the start of the new year or closer to the end to keep it really fresh. I have already gone through 3-5 in September when I burned out. 3 is about biases and kind of easy so 4 was the logical place to start. It is definietly a meaty area where I can get or miss a lot of good points. It deals with individual portfolio management. Every year the CFAI lists the actual essay questions from that years exam. The first essay question for the last 5 years has been tied for the most points and has been on this study session. I spent a full 10 days working on it and feel good, but not that good. On the essay questions, I get most of the points, but not as many as I would like. The good part about essay questions is that if you don't know all of the answer you can get partial credit. The bad part is it is so hard to get all of the points.

The main thing that I have noticed about level 3 thus far is the amount of thought involved. I am expected to actually think. The previous levels involved remembering what I learned in the texts. Now I am expected to derive your tolerance for risk based in part on your occupation. For instance, a fashio designer would be more willing to take risk than a librarian. However, they will give me an occupation and tell me to think. The text doesn't list every occupation in existence. That means I have to use judgement. If I wanted to think I wouldn't have spent so many years studying numbers. The things you have to sacrifice to become a CFA.

Burnout

2009-10-31T19:59:00.001-07:00

This has been an unbelievably busy summer. Of course today was Halloween and the temp was 88 so summer is present tense here in central FL. Anyway, less than a month after I took level 2 I started preparing for the GMAT exam. That exam isn't as difficult as any CFA exam, but it does require preparation and study. I took that exam roughly the same time as the level 2 results came out, and I was so jazzed up by the level 2 results, I ordered the 2009 texts and started studying for level 3 before labor day.

My plan was very simple. Go through the curriculum (other than ethics) once before Xmas. Take two weeks off for the holidays. Go through the entire curriculum a second time and then use the month of May for review. However, my plans had a problem. I studied for level 2 until this past June. Within a few weeks after that I started studying for another exam. Within a few weeks after that I started studying for the level 3 exam. By the middle of September I had actually gotten through 3 study sessions, but mentally I felt like it was April. I could have pushed through the material if I needed to, but the learning center of my brain was clearly burned out. For the first time since I started as a CFA candidate I decided to change my plan of attack.

The plan now is for me to still spend May for review and to spend 10 days on each study session rather than the standard week. If you check your calendar that means 180 days ending on April 30. Those 180 days begin tomorrow. I haven't studied in the last month and a half even though there were time I could have and wanted to.

I did learn several things about level 3 when I studied before though. First, this is largely a conceptual course. No formulas to memorize just concepts to demonstrate and apply. Second, everything is related to portfolio management. There is material on trusts, institutional investors, and a myriad other things that essentially reduce to modern portfolio theory. Not more difficult than the level 2 exam, but in no way could it be called easy. It's pretty clear that for right now I just need to work had and not focus about strategy until the spring. No shortcuts. No tricks. Just a treat next August.

I am pleased to inform you...

2009-08-20T15:29:00.000-07:00

You are looking at the results of the newest Level 3 CFA candidate!!!

Questions <=50% 51-70 >70%

AI 6 *

Corp Fin 12 *

Derivatives 12 *

Econ 6 *

Equity 24 *

Ethics 12 *

Stmt Anal 24 *

Fxd Income 12 *

Port Mgmt 6 *

Quants 6 *

It is impossible to overstate how much of a relief this is. I have been working on this for years – just for level 2. No one reads this blog to hear about my emotions so I won't bore you, but this feels really good. It is especially weird because if you look at the 3 questions I asked in the last post, I actually got them all wrong:
I didn't get in the right hand for corp fin. It goes to show that every time I do corp fin I am overconfident. However, there is negligible corp fin at level 3 so it doesn't matter much going forward.
Got 3 in the left. Econ and Derivatives were expected, but I thought I had done better in fixed income.
Continuing with Fixed Income, I performed worse than last year in that area. If someone had told me a week ago that fixed income was in the left column I would have immediately started reviewing level 2 for next year.
Technically, I am not a level 3 candidate yet since I haven't registered for the exam (due to financial reasons). However I have set aside some money to purchase the texts from last year on ebay. Checking out the LOS, I can see that there isn't much change between the years. I should begin studying within the next month. I will keep the blog updated with my progress.

Keys to Victory

2009-06-27T19:40:00.000-07:00

The test center the day before the test. The tables and chairs are in place. This is roughly two thirds of the total room. About 80% plus of the seats were taken and you heard nothing other than tapping on the calculator and coughing.

So it's now almost July. Nearly a month after the exam. A couple of weird things have happened. I thought that there would be good days and bad. Some days I would be certain of passing and others certain of failure. Actually, after the first week I have been analyzing the thing so much that my confidence hasn't wavered as much as I thought. I can't promise I have passed, but I am more confident than last year at this point. My analysis has come down to several yes or no questions. There is no way to know the answers before they release the results, but the answers to these questions will determine the answer to the most important question – Pass or Fail?

1. Did I get in the right hand column for corporate finance? I always feel strong in corp fin, but I have always performed much worse than I thought because of small mistakes and trick questions. On the practice exam I thought I got 10 of 12 right. I got 6 right and one of the 6 was a guess. If I got in the right hand column on the real exam, I will get FSA, equity, corp fin, and probably fixed income all in the right hand column. That would be over half the test and make it hard to fail.

2. Did I get more than 2 subject areas in the left hand column? If I got lucky economics was not in the left, but the CFA exam is not for lucky people. Study session 17 was a disaster that probably pulled session 16 and thus all of derivatives over to the left. There were other tough parts of the exam that I think I did moderately well on. For instance, quants. However, the difference between the left and middle columns on quants is one question. I think if I get 4 subject areas in the left column I am guaranteed to fail.

3. Other than derivatives, are there any subject areas where I scored worse than last year? This is the most important question. Last year I got 6 areas in the left hand column. Two of them (PM and AI) I wasn't prepared for at all last year and certainly improved. I can also say that econ probably stayed the same unless I'm lucky - which I am not since I'm taking the test a 3rd time. Derivatives moved to the left, but I don't believe anything else has moved to the left.

I almost feel like a football announcer going over the keys to victory at half time. If nothing other than derivatives moved to the left, I was able to stay out of the left hand column, and they didn't trick me too bad on corp fin, I will pass easily. If two of those questions are answered wrong, then I have failed with flying colors.

Exam Recap

2009-06-08T05:51:00.000-07:00

OK, so it is over. I took the test in Tampa on Saturday. Now comes the hardest part of being a CFA candidate - waiting for the results. The test center was at a local catholic school and wasn't as big as Chicago or Atlanta but still much larger than Jacksonville. The test itself was tough but fair. Ethics was much more difficult than the practice item sets they have given before, but last year I got in the left column and I think I improved on that not so much because I did well, but because I didn't do bad. Quants was pretty much right down my aisle. My biggest fear was that they would ask about time series, but they asked about regression so I am sure I got at least 4 right. Right now I'm thinking economics is structurally unfair. It is such a long study session with both conceptual and calculation stuff, it seems at lot to effectively cover in 6 multiple choice questions. Of course, I would probably feel different if I felt that I got more than 3 or 4 right. 4 if I'm lucky. The CFA exam is not for lucky people.

FSA was an area I believed I had to over perform and I did. There is no question I got the right hand column there. Corporate Finance is the standard problem. I feel pretty confident, but from my experience that is where they use the biggest tricks. There are some subtle differences between cash flow numbers and accounting numbers and corp fin features those differences more than anywhere else in the level 2 cirriculum. Now equity on the other hand is pretty straight forward for me. I think out of 4 item sets I may have missed 4 questions total. They have to work hard to beat me in equity. This year I expected them to come correct with fixed income because of the whole economic situation and they did. They didn't even give me a question on binomial valuation. That was a major surprise. However, I am pleased to say I felt prepared overall. I know I got most right and maybe even more than 70%. The same thing with portfolio management. I think I was able to work my way up to a 4 of 6 right. That really the best I could have hoped for walking into the exam. The one area where I really screwed up was the item set for study session 17. I thought I would be ready, but the CFA intsitute had other ideas. I don't really remember the specific questions, but this is the one area where I can definitively say that I performed worse than last year.

I am in a weird position here. Last year I got better than 80% of the people who failed according to the institute. Logically, I know I performed better than last year. In economics I think I stayed the same and most likely went down in derivatives. Just about everything else I improved in - I think. However, emotionally I am scared to death. I never really recovered from failing last year and failing again this year would be devastating. I have spent the last few days on an emotional roller coaster that promises to make the next two and a half months last even longer than last year.

Quick thoughts

2009-06-06T18:21:00.001-07:00

Just back from the exam. I just want to talk about two special events today. First, the genius moment. They gave me the current book value, the current residual income, and the current dividend. They wanted the next year book value. It took me almost 3 minutes to figure out that they wanted me to figure out the profit first before I could answer the question. It was actually a pretty clever question. I think it waqs the most clever question of the day.

On the other hand was that quesiton on cash flow. There are about 1 million formulas in the level 2 cirriculum. It is impossible to memorize all of them, so sometimes I use short cuts. One of the shortcuts is to memorize about 6 different ways to compute FCFF and 1 way to convert FCFF to FCFE. That way I don't have to remember 6 different ways to compute FCFE. Anyway, there was one question where they wanted me to compute FCFE. Of course to compute FCFF you need interest and I spent a solid 10 minutes thinking the quesiton couldn't be answered without interest expense. Of course it could if you knew the formula directly for FCFE. I got it right but questions on the level 2 exam shouldn't take 10 minute just to figure out how to answer the quesiton. I'll write more about the exam in a couple of days.

T-minus 2 days and counting

2009-06-04T11:29:00.000-07:00

Well, my mind is a big bowl of mush right now. I have been cramming like crazy this week and I still am not done. I have reviewed the mock exam from this weekend and most of the material, but I still need to review derivatives and ethics by sundown tomorrow. However, I must admit that I am pretty confident. Of course the mock exam helped, plus I have gone over just about ever item set in the texts so I know some of the tricks they might use. I believe that the key for me is to over perform on equity and FSA. Those two areas are a minimum of 30% of the exam and I believe I can get better than 80% there. I don't think I will have too many weaknesses unless they ask really hard on the PM and an item set on time series for quants (my two biggest weaknesses).

My plan is to leave here tomorrow morning and drive to Tampa for the exam. I will be able to study all evening while being left alone. I will be in a mindset that won't be too appealing to the family anyway. As far as I can tell, the test wil be given at a high school or college near the airport. I am up by 7. Shower and check out of the hotel by 8. In the seat by 8:30. The test runs from 9-12 followed by a two hour lunch and an afternoon session from 2-5. Chances are I'll finish both sections early (most people in level 2 don't need a full 3 hours). I'll post next week on how it goes.

I friggin passed!

2009-06-01T05:22:00.000-07:00

Ok so here's the deal. The CFAI offers a full length exam that they say is of comparable difficulty to the real thing. Two sessions of 10 item sets each. I wanted to take the exam this past weekend after I had the chance to review the entire cirriculum but still had enough time to learn from the questions I missed. I even made sure to take it in the conference room of a local hotel to try and simulate the environment (as best as possible without spending money). I allowed 3 hours for the morning and 3 for the afternoon, though I didn't need the 3 hours for either half. Anyway, I got 71%! It may not sound like much but the last 3 exams have shown an improvement and don't forget the scoring. No one knows what the minimum passing score is but it is probably in the mid 60s and is always less than 70%. That means if I get 71% next Saturday I will definitely pass! Of course I haven't actually taken the real thing yet.

Out of an abudance of caution in respecting the code of ethics I won't go into the specifics of what was tested, but I will say they tested every study session and I didn't do well in all of them. I thought I performed adequately in derivatives and great in corporate finance. Those were the two areas I got less than 50%. In corp fin in particular there were about 4 questions I was confident I got right and they offered me the wrong answers which I happily selected. If I performed as well on corp fin and derivatives as I thought I would have gotten mid 70s.

The schedule for this week is simple. Today will be reviewing the results of the exam. Then review the last third of the cirriculum. Then the middle third, and finally the first third. Most of the focus will be on the main concepts and all of the formulas. I won't even try to pick days to go along with it. The schedule is simple. Study until I get a headache. Relax until the headache goes away. Study again. On Friday I get in the car and drive to Tampa for the test. I am really starting to feel good about this year's exam.

Month in Review

2009-05-12T19:40:00.000-07:00

I don't know whay but I haven't been keeping up with my posts as well as I should have. I have moved along pretty well with the prep and I actually want to talk about it. First of all, let me say that I have finished the learning phase of the program. I have gone over the review for PM and for ethics and they were rough. Actually PM wasn't too bad, but it was a long session and I essentially had to learn it because it was new last year and I didn't learn it then. Anyway, I didn't get to go over as many study problems as I would have liked. I felt pretty strong, but I am not as strong as I would like to be. Then came ethics. Ethics has always been pretty hard for me, but I was able to spend a lot of time focusing down on the details and was able to get two thirds of the item sets correct. I will never feel strong about ethics though. That area more than any other on the exam depends on thinking. Just about every other question outside of ethics involves remembering a concept or calculating numbers from a formula. I naturally feel more comfortable with that type of thing. The proverbial 'common sense' thing? If I wanted to use common sense I'd be a doctor.

This is the time for final review. The exam is on June 6th. The previous week I reserve for pretty much trying to burn all the equations into my brain. That means the previous four weeks are to review the entire cirriculum. 20 weekdays to review 18 study sessions. Last week I reviewed corporate finance and statement analysis because that is my comfort zone. They will not be able to get many questions from session 5 through 9 past me. That's why I reviewed them first. This week is equity and fixed income analysis. These are also good areas for me. Conceptual questions on credit spreads at the end of fixed income will be hard if asked (and at least one will be). However equity is real strong for me and the rest of fixed income should be solid as well. This weekend I will take a practice exam and then spend next week on derivatives and PM. I will do my best to keep a update on the blog.

Finally, my motivation has been pretty good overall. I haven't been able to study too well this past weekend but that is because between mother's day for my mom and wife, I didn't want to force them to leave me alone for 2 hours a day. Regardless, I'm going to be able to make it up tomorrow and I am starting to really look forward to next month. I can admit that I still haven't mentally recovered last years exam, but I can honestly say that I am more prepared than I was last June. I am marginally better in ethics and am fully prepard in alternative assets and mostly prepared for PM. I am also better in fixed income and feel much better about quants. Of course I felt pretty good about quants and econ last year, but that is the past. Right now I am looking a month into the future.

Portfolio Management

2009-04-16T18:03:00.000-07:00

It has been too long since I have posted, so lets get to the updates. Since last time I finished derivatives which was pretty intense. It wasn't a big change from last year so I was able to get the pretty well. The hard part was portfolio management. I don't know whether it was a big change from last year or not because I didn't do a very good job of learning it last year. I made a promise to make sure I was prepared for PM this year. However, my motivation admittedly isn't the highest this time around.

Generally I have been reviewing the material specifically related to the LOS and working on practice questions. That has been adequate overall, but with PM I actually had to learn and did not stick to a good schedule that week. I learned eveything, but didn't spend enough time studying that week to work on some questions. That means I am trying to condense the material now so I can spend a couple of days working on PM practice questions. Looking at the results from last year, it is easy to see why I am trying to give extra weight to PM.

Studying overall hasn't been going as well as I'd like. The issue is exclusively a motivational one. I get plenty of time to study but I don't use as much as I should. I have decided to focus my study on methods that work for me. In the areas where I know the materials I start with the end of reading questions. I then use the results of the practice questions to let me know what parts I need to review. It isn't the ideal method, but this isn't time for ideal. I have a month and a half till the exam and need to use a month to review.

Derivative Days

2009-03-17T17:18:00.000-07:00

Wow, I haven't posted in a couple of weeks. Guess it's time for an update. First, I have totally finished AI. It wasn't as bad as I feared, but it was pretty intense. I would consider myself test ready for session 13, but not to my personal standards. I usually try to make it a point of pride to do well in asset valuation which includes AI. I will make time to review it soon.

I followed AI with derivatives (session 17) last week and (session 16) this week. If you were to do a lexis nexis search of credit default swaps you would find about a hundred references in the media this week. CDS is a part of derivatives and derivatives are in the news lately. I know that they will come correct on the exam and they will find me prepared. Luckily there are not any substantive changes in the derivatives reading this year and last year I got the 3rd column. I have actually completed all of the readings and I want to try to complete the end of reading questions by the end of day Friday.

Friday is a very special day. As I have mentioned in previous posts, my in laws watch the baby during the day on alternating weeks. My mom was watching the baby on the other weeks previously, but she has been out of town for about 4 or 5 months getting her parents affairs in order. She will be returning the end of next week, so I will be able to get some good studying in for April. I will do session 7 next week while I'm in NY. That is the last session in FSA, but it won't really be too difficult. It's getting down to the crunch time and I'm not exactly where I want to be, but I'm close. For those pilots out there, I'm not on the cross hairs, put I am on the glideslope and just need to add a little thrust. I will update after I get back from my trip.

All you ever wanted to know about Hedge Funds

2009-02-27T12:02:00.000-08:00

I didn't have the baby this week, so I was able to work on a very difficult session. Alternative investments (AI) deals mostly with real estate and hedge funds and some of the unique aspects of valuing them. There are half a dozen readings and I have finished 5 and a half. The trick is that it is of course the most difficult reading this week. The hedge fund readings are entirely conceptual dealing mostly with their unique risks. However, if I were a betting man I would bet that they will ask about real estate valuation. Anyone who has been paying attention to the news knows that the nation (and globe) is in a recession. The talking heads have blamed the proximate cause to be the subprime mortgages. Relative to the CFA program that means derivatives (SS 16 & 17), fixed income securities (SS 14 & 15), and real estate valuation (this one). I fully expect them to come correct on the exam in some misguided notion that my performance on a multiple choice test in June 2009 could prevent mistakes made in June 2007. However, those 5 session will have at least that many item sets on the exam. That is at least 25% of the test. If I perform well here, it will go a long way toward reaching my goal.

The part of the reading I haven't finished I have purposely put off until Saturday and Sunday. Saturday I want to spend the day on the reading and practice questions. Sunday I'll review the entire session. AI should be an area where I get at least 4 of 6 if I do my job right. This is one of the harder parts of the preparation right now. I'm in the middle of the journey. I have to motivate myself to work hard in February for something that won't pay off until June and frankly I have to do it alone. I don't know any other candidates and because I'm unemployed I can't afford some of the classes offered by the prep companies. My family and friends love me but I can't discuss hedge funds with people who don't know the difference between a debit and a credit. I've been here before and I'll get through it but if you're driving from NY to LA, then Indiana ain't nothing but a place to refill your gas tank.

FSA is AOK

2009-02-16T18:52:00.000-08:00

They changed econ around a bit this year. Had I studied with last year's texts I would have been in trouble and not known it. They changed the definition of direct and indirect quotes around. Not a major change, and something that intuitively makes much more sense, and it wasn't a major problem. Overall econ was much as I remember it. It was largely divided into two parts with minor changes. Last year there were only 3 arguments against free trade. This year they used some pretty tortured logic to nullify those arguments. Last year the currency parts were similar but as I mentioned, they changed the definition of direct quotes and the LOS seem to be less about calculate and more about discuss. I feel pretty good about both, but that is the real problem with econ. Currency deals with really small numbers and fractions. The key is knowing with numbers to work with and what to do with them. You must know to use the bid price and divide. No worries however! If you accidentally use the ask price and multiply they will gladly put that (incorrect) answer as one of the options. You will select that option and be none the wiser until you get the results in August that when you thought you got 5 of 6 correct, you got no more than 3 correct. Trust me, I'm talking from experience on this one.

I have the baby this week, and a bit of a family problem so I am choosing a pretty weak study session. Session 5,6, & 7 are financial statement analysis and accounting. I always get above a 70 in this area. Plus they have really watered it down this year. This week's session is session 5. Two readings and one of them is 12 pages. All of FSA is 7 readings for 3 sessions - equal to the number of readings in econ. The readings are longer, but not particularly meaty. Last week was a chicken thigh, this week is a chicken wing. I will be flying to NYC round trip this weekend to bury my grandfather so I should have session 5 done before I leave and use the flights to review quants and econ. If I had actually performed on quants and econ as well as I thought I did, I'd be about halfway done with the level 3 cirriculum today.

On to Econ

2009-02-09T05:46:00.000-08:00

First of all, the CFA institute was really on the ball. I ordered the books after business hours on Wednesday. They arrived by 5pm Friday. I don't know where the books were located, but standard delivery from VA to central FL usually takes more than 48 hours. Hell, standard delivery from Atlanta to central FL is 3 days. Anyway, I got the new books which included the new reading for study session 10. SS10 is pretty much an intro to valuation, but the new reading had several new ways to calculate the required return rate (I'll just call it K for this post). For those who aren't into finance I won't go into detail but K is one of the fundamental concepts. Without K most of the level 2 cirriculum wouldn't exist. In fact, K is the foundation of level 1 as well. I now know about a half dozen ways to compute it. ThCFA people tend not to test new readings the first year, but it would be criminally negligent to walk into the exam without being fully prepared for this one. I can say that I am fully prepared on all of SS10 including the new reading. I even did pretty well on the practice questions. That means since it's Monday, it's time for a new study session.

Since I don't have the baby this week, I wanted a session with some meat to it. SS4 (economics) is perfect for me. First, it is the longest. It has over 100 pages of textbook reading (very dry stuff at times). It is divided into 7 readings and with only 6 questions on the exam you know they won't test on even half of the stuff. However you don't know what part they will test so you have to learn everything. Also, the currency exchange that I learn in this session is imperative in other areas. The session is largely in two halves. The first is the ideological and conceptual stuff. This isn't a politcal blog but the people who write the economics texts are obviously McCain supporters. It boils down to gov't regulation is bad and the best countries in the world have the weakest investment laws. If you can't speak the company line it will probably hurt you on the exam. The second half of the session in foreign exchange. That area is trick for me. I understand the concept well, but the calculation can be a bitch. To convert from dollars to whatever you have to know whether to use the bid or ask price and whether to multiply or divide. If you get it wrong no worries! They have the wrong answer you just got as one of the 4 choices. You fill in the oval thinking you got the answer right until you get the results in August showing you got at least 3 of 6 quesitons wrong. Trust me I am talking from experience. I will be spending most of this week on currency exchange and GOP ideology, and if there's time leftover I'll review quants.

Level 2 Candidate

2009-02-03T19:58:00.000-08:00

It's official – I am a Level 2 candidate (again). I paid the fee to enroll and received electronic confirmation that I am enrolled for the exam. One of the ethics rules makes it clear that you are not a candidate until you pay the money. You then remain a candidate until the day the results are released. Anyway, I had to register I couldn't wait much longer. I started studying a few weeks ago, but I have hit a wall. There are no easy study session left where they haven't changed the material from last year. Study session 10 (capital markets) looked promising, but they changed one of the readings. Same for statement analysis. I would be more than willing to do a hard study session but I can't, my son won't let me. I lost my job last fall (why I didn't register for the exam months ago). My wife works 13 hours a day on Monday, Wednesday, and Friday. Right now, on alternating weeks my in laws watch my 15 month old son for 8 hours on those days. On those weeks I have plenty of time which allow me to do some real studying. The other weeks, I am stuck with him all day long for 3 days a week. If you have ever babysat a 15 month old you know that you can't take your eyes off of them for 5 minutes. I have to strap him into the stroller to use the restroom. I am literally unable to study before 8pm this week on M, W, and F. That means I am limited to light material. However, there is no more light material that hasn't changed at least a little from last year.

I have finished corporate finance which is study sessions 8 and 9. Those are my favorite areas of learning usually and I don't know why I didn't get above 70 on the last exam. I did tighten up on economic income and profit (not like accounting income and profit). I did very well on the practice questions. This most recent week was quants – study session 3. The first two readings were single and multiple linear regression. I feel confident on those overall. I didn't study as much as I planned and am not as tight as I'd like, but I feel strong about it. The third reading is time series analysis and that could be tough for me if they test it in June (I'm certain they will ask at least 3 questions minimum). The first half on the reading is simple enough, but when they start asking me to test for errors and correct them, my eyes start to glaze over. This chapter more than any other in the level 2 curriculum has all of those weird statistics and symbols. If you remember high school trigonometry with all the weird greek letters, that is the last half of time series analysis. I am going to have to make some time this spring to learn this stuff. For now, I am moving on to study session 10. I should be able to work most of it by the end of the weekend. It will be even easier now that football season is over.

Level 2, Take 2

2009-01-16T05:07:00.000-08:00

August 2008

3016626
Marc B. Ross

Level 2: Fail

The table below illustrates your subject matter strengths and weaknesses. The three columns on the right are marked with asterisks to indicate your performance on each question or topic area.

Item Set

Q#	Topic	Max Pts	<=50%	51%-70%	>70%
-	Alternative Investments	6	*	-	-
-	Corporate Finance	12	-	*	-
-	Derivatives	12	-	-	*
-	Economics	6	*	-	-
-	Equity Investments	24	-	*	-
-	Ethical & Professional Standards	12	*	-	-
-	Financial Statement Analysis	24	-	-	*
-	Fixed Income Investments	12	*	-	-
-	Portfolio Management	6	*	-	-
-	Quantitative Methods	6	*	-	-

We have divided the full group of failed candidates into ten approximately equal score bands. Your score band below shows how your overall score on the exam compares with all other failed candidates.

For example, if your reported score band is 1, you scored in approximately the bottom 10% of failed candidates. If your reported score band is 2, your score was within the next band width ranging from approximately the bottom 11% to 20% of failed candidates. If your score band is reported as 10, you scored in the top 10% of all failed candidates.

Performance band of your overall score among all candidates who failed the exam: 8

_____________________________________________________________________

I'm Back. I have posted my results from June above. I'm not going to lie, I was devastated by the results. I felt more prepared for this exam than any other CFA exam and prepared more for this exam than I ever prepared for any test in my life. I even thought about quitting the program for about a week, but I thought better of it. Ultimately I started to recover and hear I am. First, last year's results. Where it says max results I put in the number of questions they asked in that area. I wasn't really surprised by ethics. Ethics for me is the one part of the exam I can't really prepare for as well as I'd like. I read the handbook and even work the examples, but the questions are always complicated. They try and test 2 or 3 rules per exam question and I always have trouble figuring which rules take precedence over the others. Is my primary duty to the employer, the public, or the designation? I usually get 4 of 6 on the practice exams, but never more than that. Fixed income is always an area where they ask tough questions. I went into the test thinking I was prepared and walked out of the test thinking I did well. They asked a bunch of conceptual questions this year that I thought I got most of them right. Apparently, I got no more than half right.

Economics and quants cost me the exam. I thought between the 12 questions I got at least 10 right. I thought I got the 5th question on quants wrong, the 6th question on economics wrong and remainder right. I got at least half wrong and that difference of 4 questions probably cost the exam. I honestly don't know how I can prepare harder on economics. Portfolio mgmt. was unbelievable. They changed the cirriculum in that area totally this year. I knew before during and after that they would ask 6 questions and I'd be lucky to get 3. I probably got 1 or 2 right. That was the one area of the exam I expected to get in the first column. I didn't expect to do so poorly on Alternative Investments. I didn't expect it because I didn't know they would ask it. It was one reading as part of equity investments. The entire reading was about real estate valuation. I got the main concepts down but thought it would be 2 or 3 questions as part of equilty valuation. Instead, it was it's own item set. I was screwed.

The good news is that the areas I thought I performed the best in, I was right. I expected higher in corp fin, but overall, I did well in asset valuation. According to the email above, I did better than 80% of the people who failed. Also, according to the email above I did worse than 100% of the people who passed. Apparently I need to maintain in the asset valuations, work my ass of in quants and econ even more than before, spend some extra time on fixed income, and actually put forth some effort on A.I. and P.M. That should not just get me passing, but with flying colors.

So that's the story. Now to make it happen. This week am finishing up the first study session on corp fin. There are 2 sessions, each with an item set in June. I am almost done with the first. I have to work on a couple of practice questions, but it won't be too bad. I wanted to start with an area I feel confident in so I can wrok up to full speed. I can't just go from studying 0 hours last week to 20 this week. So I start with an area where I have to wrok hard, but not too hard. Finance is perfect. I now most of the material, but some of the finer points, mostly memorization of lists, will get by brain working again. Like the transmission of a car you can't go from 1st gear to 5th. Well, my study plan has me doing a study session a week until the first full week in May where I spend the month in review. The hardest part is that I'm studying stuff I was convinced I new last spring. I won't be able to get over that for quite some time.

I Regret to Inform you...

2008-08-26T06:42:00.000-07:00

I didn’t pass the exam. This one really hurts. I have failed before, but this one was worse. I felt that I was really prepared this time. I spent a great deal of time studying and felt I knew the curriculum pretty well. Walking out of the exam I thought I had done my best performance ever on a CFA exam. It turns out that I wasn’t close. Anyway, I don’t want this blog to be about pity or any of that sentimental crap. I will do an analysis here soon on where and why I messed up. Of course, I will be taking the level 2 exam in June 09, but the only silver lining here is that because I’ve taken the exam before and know most of the material, I won’t have to start preparing as early. If I was taking level 3, I would have started preparing in September. Since it’s only level 2 I’ll probably start around election day. I will definitely use this as an educational experience in preparing for the next exam.

Level 1 results

2008-07-29T06:15:00.001-07:00

The level 1 results are out today. Of course being level 2 this doesn't affect me much, but it's still another milestone in this interminable wait. The level 1 results are out early because if you fail, you need enough time to prepare for the next exam which is now four and a half months away. With level 2 and 3 the next exam pass or fail isn't until June 09. It's a good thing that they are giving the people who failed time to prepare because according to the website two of every three test takers at level 1 failed. The total pass rate was 35% which is the lowest ever in any year for any level. I'm not too surprised about that.

There are two factors I believe lead to that pass rate (or is it failure rate when it's that high?). First, the popularity of the designation has greatly expanded over the years. Employers want people with the designation and that leads more people to make the attempt. However, employers want the designation because it is hard to get and too many candidates don't respect that. Take it from me, someone who has failed level 1 before, it takes over 6 months of hard studying for at least 200 hours. People constantly ask for shortcuts or ways to not have to study. It doesn't matter how much you know, or how smart you are. The main factor is how hard you work.

The second factor is that the universe of finance is constantly growing and the knowledge that they test is also expanding. 20 years ago derivatives was a very small part of the financial universe so one didn't have to know much about them to earn the charter. Today derivatives are much more popular in the real world so candidates are tested more now than before. There are something on the order of 20 times as many hedge funds today was there were 15 years ago, so now a candidate must learn about those as well.

Learning Outcome Statements

2008-07-21T07:04:00.000-07:00

A week ago today the 2009 L.O.S. were released. I don’t know if I ever mentioned it before, but the los stands for learning outcome statement and they are the key to passing the exam. Long story short, the LOS tell you what you need to do to pass. I’ll give an example. The institute tells you to read chapter 4 in a particular book. That chapter has a section that goes over 3 different ways of computing an average (this actually happened to me). One might assume that means you have to be able to compute an average using all 3 methods. However, the LOS might only say that you need to compare the 3 methods. That means you have to know how they relate to each other and some other aspects, but you won’t have to compute or calculate unless they say so. In the long term, if definitely focuses studying in various areas. There are entire reading where you can get bogged down in memorizing when they want you to understand concepts, and times when you can focus so much on the concepts that you forget you are just supposed to memorize a list.

However, this list isn’t really for me yet. I haven’t gotten back the 2008 results, so I don’t know which test I’ll be taking. The list is released early because there are some people who may not have taken the 08 exam but who already know what exam they’ll be taking in 09. The LOS however are totally useless without the list of the readings. If the LOS says know formula X, they mean the formula listed in the readings. If you get it from some other source there are enough small differences over time that you would find it impossible to pass. I’m not in any rush to get into the material, but I did read through the level 3 LOS. I have heard some people say the level 2 is harder, and it might be true for me based on the LOS. The hard part for me was the calculations and number of formulas, but there are very few level 3 LOS that say compute or calculate. There is still plenty of reading to go over though. I don’t plan on getting fully into the studying until September or October, so I won’t be reading any more LOS at least until the results come out. We are down to 1 month remaining.

There's a first time for everything.

2008-06-25T04:41:00.000-07:00

I have taken the CFA exam before. Let's just say I've taken it more than once before. Every time I have taken it, they have given me an estimate of when the results will come out. They have always said the results would come out by the end of month X. For level 2 and 3 they always given the exam the first Saturday in June and the results would be out by 'the end of August'. They would never state the day so starting around the 15th until the results come out, I just check the website at least 5 times a day. Today they sent me a email for the first time ever stating that the results will be out August 19th at 9am. They probably did that because they were tired of having me and everyone else hitting the refresh button every 5 minutes. I alled them to confirm the email and it's legit.

I have never known before hand when the results would come out. Now I know. On one hand, it eliminates uncertainty, but I am going to be a nervous wreck on August 18th. It's kind of like being pregnant, but knowing for certain the date the baby will be born as early as the 2nd trimester. I'm not counting down to a particular week or trying to manage my nerves for the long haul. By lunchtime on the 19th, I'll know the results. I can't wait.

Hating other Players

2008-06-18T04:49:00.000-07:00

The main reason that I am doing this blog is that to earn a CFA charter is a unique experience. It is an experience that requires several years - more if you fail the exams. It is also a relatively lonely experience of self study and most people haven't heard of it. If you are doing it toimpress family or friends, you are wasting time. You earn the charter to get a good job in investment banking. On the internet there are discussion groups for a great many things, but there aren't many outlets for CFA charterholders or candidates. If I wanted to chat with another candidate about the recent exam, there are very few choices. Google CFA and you will find mostly ads or study materials.

One exception to talking with other candidates is a website called analystforum.com. This is the biggest forum I have found thus far devoted to CFA candidates. I do not like this website at all. it's a personal thing, but if you wish to check it out, please feel free to do so. I don't like it for several reasons. First of all, they tend to destroy my confidence. Everyone has their personal strengths. For instance, I have had trouble with derivatives in the past. Go to this forum, someone will post a question on derivatives asking for help. Derivatives are a weak area for me, but not others. There will be 20 people with answers to the question I can't answer by the close of business. That tends to make me feel dumb and unlikely to pass.

Another problem I have is that some people are just jerks. To get my self motivated for the test I think of my past bosses who have fired me, and think of my baby boy. That motivates me to study and probably to pass. Others get motivated by convincing themselves that they are the best. They do this by actively putting down others. 'You are stupid for not knowing portfolio management and seeking help. I just did portfolio and got all of the practice questions right. You have no chance at passing, don't even bother showing up.' I don't need to hate on you to perform my best. I enjoy a little smack talking during a card game or sporting contest, but I'm not going to take time out of my day to expressly try to talk smack to you so that you fail. Hell, if I get 70%, then the other candidates might as well not be there as far as I'm concerned.

Then is the main reason I don't like analystforum. That friggin idiot. As it gets closer to results release, I am going to be on pins and needles almost constantly. I will be checking the results page at least hourly in a couple of months. There will also be that friggin idiot on analystforum who falsely says that the results have been released at least twice a day. I don't know who that idiot is, but it shows the maturity level of a 7 year old. It's kind of like waiting for a college acceptance letter as a high school senior and your younger sibling goes through the trouble of mailing you an envelope with college letterhead and all that's inside is a letter saying 'Gothca!' I think an adult resorting to that level of immaturity with a bunch of emotionally unstable candidates should be a felony.

2008-06-11T18:22:00.000-07:00

This is the room I took the exam in. It was in the convention center in Chicago as it is in most big cities. I took this the day before the exam just while they were finishing the setup. You see two rows of tables with each table sitting 4 people. What you see here is pretty much what I got. This picture is taken from the entrance. There are restrooms on both sides of the hall as well as water coolers. That way, they lock the doors and no leaves until they are done with the exam. They give you a chair and you share a table with someone else. You bring your own pencils and calculators. “The time is now 9 o’clock. You have 3 hours to complete this portion of the exam. You may begin.”

The two most common questions that I get asked at this stage are ‘Did you pass?’ and ‘When do you find out?’. The third most popular question is ‘What is a passing score?’ or some other variant. Let me answer the simplest question first. The test is administered the first Saturday of June every year without exception. The results for level 1 are released around July 18th or so, and the results for Levels 2 and 3 are about a month later. Please understand that the results dates are rough estimates. If you try and visit cfainstitute.org today you will see the website operates very smoothly and quickly. If you try it starting around August 15th, it gets progressively slower and slower as a hundred thousand people from around the world check the site every hour or less to see the results. It’s kind of funny until it’s you waiting for the results.

The CFA institute passing score is like Bigfoot. A few people claim to have seen it, and there are reports all the time from people claiming to have proof, but those people are usually drunk, a-holes, or sometimes both. First I will go with the facts, then some theories. First, no one has ever gotten a perfect score. Second, the passing score is fluid. It changes between levels and years. The passing score for level 2 in 2008 will be different than the passing score for level 1 in 2008, or level 2 in 2007. However, CFAI does state that the passing score is adjusted according to the difficulty, and that the passing score is never higher than 70%. That means if I got at least 70% right, then I automatically pass. However, I will never know exactly what I got. The results are released in a bit of a grid. On the left hand side list the different subject areas of the exam (ethics, econ, derivatives, etc.). Along the top is a column for 50% or below, between 51% and 69%, and 70% and above. Then there is a grid with the appropriate marks for what you got in a specific area. There is an introductory sentence that begins with either, ‘We are pleased to inform’, or ‘We regret to inform’. That means for corp finance, I only will know whether I got above 70% right, below 50% or in between. I won’t know exactly how many I got right on any specific area of the test or the test overall. Last year I was asked 12 questions on derivatives. I don’t know whether I got 6 right or none right, but they did tell me it was 50% or less. That hardly seems fair to me, but I am positive I got more right this year. I have heard from some people that a passing score is 70% of the top 1% of test takers, and since no one has ever gotten 100%, that the number is usually in the mid 60’s. I don’t know how they figure it out, but ultimately I can’t spend too much time thinking about it. That would only matter if I stopped answering questions after answering the first 70%. I tried to get the best score I could. If it’s good enough I’ll pass. If it isn’t I’ll get pissed. Passed or pissed I still have over 2 months to go.

The Day After

2008-06-08T12:43:00.000-07:00

So it’s finally done. I have finished the exam. This is always the weirdest part of the process for me. It’s like being driving all day long cross country and then when you finally get to the hotel and sit down on the couch, part of you says “Time to go. We have to keep moving!” I spent over 20 hours of studying last week and at least that much the week before. Now, I have no studying. I have gone from full speed to stop. For the last couple of months all my free time has been spent studying or getting mad at myself for not studying. Now what? I don’t know what test I’m taking next June, and they haven’t told what will be on the test yet. However, my brain is saying that it’s a rainy Sunday afternoon with no good sports on – the perfect time to study. I know I need some time off; it will just take a few days to get used to it.

The biggest problem that I have with the test is that it’s multiple choice. There are 4 choices and you are either right or wrong. If I am computing the formula for DDM and for get to use next year’s dividend instead of this years, I am 90% right, which on a multiple choice exam is 100% wrong – especially when they will have the dummy answer as a choice so that I think I got it right. No one ever answers a question on a multiple choice exam intentionally getting the wrong answer. Either you think you got the question right or you guessed. For me, I think I performed well. I know I did much better than last year and guessed relatively rarely. Out of 120 questions, 12 are ethics (which is entirely another beast). That leaves 108 questions and I guessed on less than a dozen of those. If I got all of the other ones right, then I passed with flying colors. As a practical matter I certainly think I passed. However, there were 2800 other people in the room who also think they passed and most of them won’t. Anyway, there are no results yet. Not until much later but I’ll go into that another time.

Full Steam Ahead

2008-05-29T05:55:00.000-07:00

This is always an interesting time during the preparation. I have 9 days to go. I will quickly forget the last bit of preparation before the exam 6 months from now, but this is the time that determines whether I pass or fail. This week I have reviewed derivatives and portfolio mgmt. Today and tomorrow is fixed income securities. I think derivatives may be the most important of the 3, but that's more of a feeling based on what I know about myself and my history. Anyway, next week is just reviewing the major concepts and all of the formulas.

Last weekend I took a practice exam just like the last post. Both exams are administered by the CFA Institute and are supposed to mirror the difficulty of the real exam. In reality, CFAI is jst really stingy about releasing past exams, so the practice exam is just a potpurri of past exam questions (including several I remember from last year). Anyway, out of a 60 question test I don't know the odds of receiving the exact same score two weeks in a row but I did it. At first, i was disappointed about my failure to improve, but the 2nd exam since it was actual past questions, tested me on past subjects. There were 2 questions on calculating a franchise PE. This year they changed calculate to analyze. There were 3 questions on levered Beta. This year levered Beta is not in the cirriculum.

Anyway, there isn't much going on with me right now at home other than studying. This weekend is a full length exam (120 questions), and review on Sunday. Then next week is the final sprint to the finish. I like my odds for this weekend's practice exam.

Equity Valuation

2008-05-20T05:41:00.000-07:00

I took a practice exam this past weekend. I will go more into passing scores after the exam, but for right now I’ll say that I probably didn’t pass but I’m pleased with my performance. I am reviewing a part of the curriculum every weekday. On the areas I have reviewed thus far, I did well. On the areas I have not yet reviewed I didn’t do as well. Since I am on schedule for the milestones I have set, I am satisfied with that. The idea is for me to spend the rest of this week reviewing equity valuation before taking another practice exam this Saturday. Next week I review fixed income and derivatives and the following Saturday, I’ll take my last practice exam. That means I’ll be done with reviewing the curriculum in about a week and a half.

This week is really special though. If Level 2 was a seven course dinner party, equity valuation would be the main course. Without going into to much detail I’ll say the fundamentals of equity valuation reach throughout the rest of the curriculum so this is by far the most important stuff I have left to review. It is also an area I felt really comfortable in when I learned it 2 months ago. If I can just refresh myself on what I have already learned, equity will be a fun part of the exam for me. This past week I missed passing by 4 questions, and I missed 2 of the equity valuation questions. I am well on my way to where I want to be, but I’m not there yet.

This is Where I Pass or Fail

2008-05-07T04:50:00.000-07:00

I have finished reviewing portfolio management. That was the last area I had to learn before the exam. For once, I am not entirely satisfied with my performance. I spent a great deal of time working on the material and have enjoyed PM in past exams. However, this year they added a really long reading which I am certain this will ask some questions on. Mentally, I was prepared to review PM, not learn it. My schedule beyond PM was written in stone and I won't push it back. That means that I feel somewhat prepared for PM, but this is the one area of the exam where I didn't feel 100% test ready at the end. I will make some time to review and learn what I can, but I'll have to go to war with the weapons I have, not the weapons I want.

Now I have 31 days before the test. I have spent the last 5 months learning material, and at the end of learning the matrial, I felt really confident. However, some of that material is stuff I learned in January. I have certainly forgotten some of it. Now is the time to review. It took me a week and a half to learn economics. I have given myself today to review it. The next two days are ethics (more important part of the exam). If I give myself a weekday to review each study session I will need 18 weekdays - the exact number left in May. Each Saturday I will take a practice exam, and on Sunday I will review the parts of the exam I missed. That should take me through the 1st of June. Then that week I will focus on individual concepts that I have trouble with. I will be taking the test in Chicago (visiting in-laws) so I will arrive a couple of days early. If I remember everything that I knew when I finished learning the material, I should be in a solid position to perform well. I will keep updating on my review. The review for the rest of May will determine whether I pass or fail the Level 2 exam.

OK, maybe they don't totally suck

2008-04-25T11:48:00.000-07:00

I don't know what it's been but I've been doing a really good job with studying this time around. I finished futre and forwards, which is half of the derivative material, and I am in pretty good shape. I still have to do options which will be harder, but I am pretty solid on forwards and futures. If I can do options and swaps as well as the rest then I should be able to do some damage on the derivative portion of the exam. Who knows it may even become a strength.

Derivatives Suck

2008-04-22T04:56:00.001-07:00

In the past, there has always been a part of the exam that I had trouble with and tried to over compensate in other areas. Last year I found derivatives to be that area. Truth be told, Derivatives were tough at level 1, but level 2 is an absolute beast. Some level 2 candidates say they don't find derivatives to be the toughest part of the exam. As far as I'm concerned unless you work with them in your job it is the toughest part of the cirriculum or you are on drugs.

Anyway, as you can see, I am working on derivatives right now. This should be about 10% of the exam and it will be hard to pass without getting at least half of this section correct. This is the only section of the exam that I have trouble following conceptually. I know what derivatives are, but valuing them and exploiting arbitrage opportunities at this level has proven hard for me. Right now I am finishing up futures and forwards - both of which I am minimally prepared for. I still have some conceptual problems, but I can value and price them pretty well. Next I go to swaps and options. Last year, I found them to be painful. My performance on derivatives will be the primary determinant of whether or not I pass. The maximum passing score is 70%, though in practice it will probably be closer to 65% or less. Ethics will be 3 or 4 item sets and I will get about 60% of that. Most other areas I should get about 70% - more if I do well. However, the 2 item sets on derivatives could sink me if I don't get at least half right. I will be reviewing heavily over the coming days and probably have an update next week.

Crunch Time

2008-04-07T05:39:00.000-07:00

Frequently in the past, I have had trouble focusing during certain stretches of preparation. There have been weeks where I had scheduled myself to go learn a certain subject, but I just haven't been able to concentrate enough to learn the material. This time has been different. Maybe it has to do with having a new baby. Maybe it has to do with some recent changes at work. Whatever it is, I am getting a lot of studying done this time around. I'll describe last week for example. My normal studying is at home during lunch (up to 45 minutes), and an hour or so at home after work except for Thursdays (home alone with the baby). Charitably, that's 2 hours a day. However, I am taking an online course to help prepare, and that course is 3 hours per week. Also, at work I have been working a lot of practice questions lately. I conservatively estimate I did at least 3 hours of practice questions while at work last week. Also, 2 days last week I did some extra practice questions after dinner. All told I did about 17 hours plus between Monday and Friday of last week. In the past that would leave me feeling burned out. This time it was a warm up for the weekend.

Saturday morning I did an online practice exam offered by the CFAI (the people who administer the real exam). I got 60%. I wanted at least 70%. I wasn't pleased with the score, but I was satisfied overall with my performance. The thing is, that the test was 5 item sets. 1 each for ethics, statistics, and economics. I got 50% on each of those. I was pleased with that because these are areas I haven't even looked at since February. I was able to remember half the stuff from nearly 2 months ago before even reviewing any formulas. There was also an item set from statement analysis where I did 3 of 6 and an item set on equity valuation where I got 5 of 6. I spent another 90 minutes reviewing what I missed in statement analysis. Then, after dinner I did the next reading so that I would stay on schedule. Long story short, I got in some 7 hours of prep over the weekend. I don't get that much in most weeks, but I have been somewhat enjoying this over the last few weeks and I don't want to lose a good thing.

How do you get one?

2008-04-02T04:49:00.000-07:00

To get the charter is not too complicated. The rules are very simple. First there are three exams, which must be passed sequentially. Second, you need at least a Bachelor's degree. Finally, you need 3 years of experience in finance. The exams must be taken and passed sequentially, and you need the Bachelor's degree before you take (but not necessarily enroll) for the first exam. Sound simple right? Not even close. As I have said before, it really is a quest.

Imagine you are in college. You go to class on the first day. The teacher gives you the text, and tells you the learn the first 5 chapters. Then tells you the final is on day X. Then the teacher leaves the room and you don't see him until the final exam. Now imagine if every teacher did that. Now imagine if all of your teachers got together and decided to combine their exams in to one giant super exam. That in many ways is a CFA exam. The cirriculum is based on several subjects. Ethics, statistics, economics, financial statement analysis, corporate finance, equity valuation, bond valuation, financial derivatives, and portfolio management. The cirriculum is presented in 5 texts, which should be read from cover to cover to be prepared for everything. That's the worst part of the cirriculum. I read over 100 pages of material for statistics for the level 2 exam, and they ask me 6 multiple choice questions. At most these questions can cover about half of the statistics material.

The level 1 exam is 240 questions all multiple choice. If you pass that, level 2 is item set. They give you a page of information. They ask you 6 multiple questions for each page of info. That is an item set. The level 2 exam is 20 item sets for a total of 120 questions. The level 3 exam is 10 items in the same format as level 2 and several essay questions. Each exam is 3 hours in the morning, a two hour lunch break, and 3 hours in the afternoon. The level 1 exam is offered on the first Saturday in December and June. The level 2 and 3 exam is offered on the first Saturday in June only. It takes about 50 days to get the results from level 1 and about 80 days for level 2 and 3. That means if you take level 2, you won't find out until the middle of August if you passed, and if you don't you must wait until June to take it again. That is where I am.

It took me 3 tries to pass level 1, and I already failed level 2 once. I am in the middle to studying again, but this time I am getting help. If you ever took the SAT in high school, then you know Kaplan offers study aids to improve your performance. Kaplan has a subsidiary named Schweser that does the same for the CFA exam. I actually do an online class with them that I think has helped me a lot. I'll go into more detail about my study schedule in a later post.

So what's the big deal?

2008-03-28T07:15:00.000-07:00

Why does earn want to earn the charter. I can't answer for everyone. Hell, my answer is different than most. It's actually a key to a dream. Ever since childhood I grew up wanting to work in one of those big gleaming office towers downtown. I wanted to be the guy working on Wall St. before I knew what they did. I have since refined my desire to be a great analyst. I want to be the talking head on CNN talking about th airline industry and why this new merger is / isn't a good idea. Will the charter get me on CNBC? Nope. However, it will get me a job as an analyst - even if not the chief industry analyst. Right now I am working as an accountant on Florida's atlantic coast. In fact, in a suburb of Daytona Beach. A charming town, but no investment bankers here. Plenty of accounting jobs, but not finance.

I have a BA and almost a decade of experience, but that is my weakness. I apply for positions as an analyst, my resume gets scanned into a computer which looks for keywords. It sees all the experience I have as an accountant and the computer sends my resume to HR. HR calls me back and says they have an opening in accounting that would be perfect for me. That's not what I applied for, but it's what they call about. With the charter, they will call me back for the job I want. What I want is quite simple really. I want to move to Atlanta (one of my favorite cities). I want a job as an analyst. I want to have at least the same standard of living after adjusting for the cost of living. I want to be involved in decision making. I want it all in the next few years. The CFA charter was the only thing I could find that can get me those things.

Most people who earn the charter already have jobs in finance. It's kind of like accounting. Most CPA candidates are already accountants, but they want more. I have nothing against CPAs, but it's about accounting and I want finance. No other designation is as valuable as a CFA in the field of finance.

First Entry

2008-03-28T06:45:00.000-07:00

Welcome to my new blog. This blog is about my quest to earn the Chartered Financial Analyst designation - also known as the CFA designation. For those who don't know, the CFA is a professional designation used primarily in corporate finance and investment banking firms. This designation is held by approximately 70,000 people worldwide and at most there are 30,000 people who are candidates. Between those 100,000 and maybe another 100,000 who may be considering earning the charter, we are talking about a very smal percent of the world's population who might be interested in this blog.

I am writing this blog for several reasons. First, anyone who is attempting the charter feels lonely. Some more than others, but all are lonely. This is a written record of my quest so that others may know what it is like. Second, for my benefit. My son was born very sick and I needed an outlet for my thoughts and feelings. I created another blog on the matter and now that he is healthy, I sometimes will read my past entries to remember the feelings. It is fun now, but it was hell then. Finally, to provide a decent record. If you search for CFA blogs in a search engine, many blogs compare the charter to other things. Some blogs are posted to for about 2 months and that's it. Most others to put it bluntly are incoherent. They start right in responding to some esoteric article or posting DIY notes on the cirriculum. That's not going to happen here.

Everything I post on my blog will be my opinion, and I readily acknowledge that. If someone else has a different opinion than me, or facts that prove me wrong, please post them. Maybe we can start a discussion. However, realize everything I say is with my own personal bias.