CFA Level 1 Exam June 2012 - Action Plan for the last 4 weeks

This blog will be divided into 4 parts. This is first part of the blog.

I get a lot of query on what to do in the last few weeks before the CFA Level 1 Exam.

So, i thought it would be useful for the folks if I pen a few words highlighting suggestions, warning, pitfalls.

No doubt that the CFA Examination is a tough one, but the last month can be a make or break for anybody. If you proceed methodically in the last 4 weeks then the chances are huge that you would emerge successfully.

Let's dissect the CFA Level 1 Examination topic wise and see where you should have thrust on.

Topic Areas	Weight	#  Readings	Difficulty Level	Importance
Ethics/ Professional Standards	15%	1	Easy	High
Quantitative Methods	12%	2	Difficult	Medium to high
Economics	10%	3	Medium	Low to Medium
Financial Statements Analysis	20%	4	Difficult	High
Corporate Finance	8%	1	Easy	High
Equity Analysis	10%	2	Easy	High
Fixed Income	12%	2	Medium to Difficult	Medium to High
Derivatives	5%	1	Difficult	Low
Alternative Investments	3%	1	Easy	Low
Portfolio Management	5%	1	Easy	Medium

The idea is to ensure that you put a lot of emphasis on those topic areas which have high importance and also the one which are easy. Following this you should be able to easily focus on around 80% of the syllabus. You should have command on these subjects and should be targeting marks in the area of 80% +. In all the topics, you should be able to pluck those low hanging fruits, so it is never advisable to leave any topic area for the exam, the discussion below follows on optimal selection – optimizing the effort versus the marks.

We have two topics which I have said as difficult and gave them medium to high importance level - these are quant and fixed income. Its not that all the topic areas are difficult, you should focus on the earlier readings for these subjects. For quant the focus should be on Reading 5 to 8 (that is session #2) and reading #12 - technical analysis. I am not saying that you should leave reading #9 to reading #11, but study them from the examination point of view, that is you should be able to successfully attempt the easier questions.

In the fixed income, if you leave the spread concepts in the reading #58, then all of the fixed income is quite logical and the flow of the topics in the syllabus is also quite good. I would say that the students should have absolute command on the readings #53, 54, 58 and 59. These are the crux of the fixed income material and most of the questions will be asked from these topics. The readings which I have left are the overview of the bond market, which is very much analytical in nature and you will have to remember the types of instruments which are there in the US (difficult for non-US students, but most of the country has similar type of structure). In yield spread topic, please understand the underlying theory and the equivalent tax yield of municipal bond or after tax yield of corporate bond. In reading #57, whatever we are learning are used elsewhere in the topic, but here they introduced 2 things – the reinvestment return and the arbitrage profit from the bonds, make sure you know how to compute this.