Category Archives: CFA level III

Subject weights for CFA level III exam for last 4 years



The .xls file for the weights can be downloaded from here: cfa-level-iii-exam-weights.

I have compiled the data from the last 4 years’ CFA level III exam. The important points to notice from the data analysis are given below:

Ethics: No two ways about it. If you want to maximize your probability of success, you need to study it from the curriculum. You will get 10% from Ethics and it will be in the afternoon paper and thus it is even more important. Because if you know the areas in the afternoon exam, you will get full marks for that. That may not be true for the morning exam.

Private Wealth + Behavioral Finance: Total of 16-20% will come from this area and behavioral finance would be only 2-4% of it. This is the area that would give you the least return for your time investment as it is time-consuming to study it and there are high chances to get the answers to the questions wrong for this subject. For this topic, practicing last 4-5 years’ actual CFA exam morning exams would be sufficient. No need to waste more time on this area as the returns are less likely to be good.

Institutional Investors: 
The weight of Institutional Investors is most likely to be around 9% i.e. around 32 marks in the morning exam. Since there are only two small chapters in ‘Institutional Investors’ subject, it is extremely important to focus on this area to maximize your score. It is most likely to give you the best returns for your time. The second chapter, though very small, is also important and in last few years, CFA exam setters have asked few questions from that chapter as well. You are more likely to find only essay based questions from this topic.

Economic Analysis: Two chapters are there in this area: Capital Market Expectations and Equity Market Valuation. Most of the questions would be formula based numerical from this area and this is a high scoring area. One item set from one chapter would come in the morning exam and in the evening exam, it would be from the second chapter. You may want to revise the formulas of that chapter in the time gap between the morning and afternoon exam.

Asset Allocation:
This topic is sometimes mixed with the private wealth case. You need to focus more on the currency portion of the topic. You are more likely to get questions from that chapter. The weight of this chapter is less and is not a good time investment.

Fixed Income: One of the most important area and also one of the easiest topics in CFA level III curriculum. The average weight of this topic has been closer to 12%. It is very important to revise all the three chapters on this topic. It is most likely to be asked in both morning and afternoon exams. Most of the questions would be formula based. You should be good with your formulas and concepts to score well in this area.

Equity: Only one chapter and weight of around 7%. It would also give you the best return on your time investment. Revise it 2-3 times and do not get any question wrong. Most of the questions would be theoretical and conceptual. So, two three times revision is very important.

Alternative Investments: Generally, the weight would be around 5% only. The average weight is 6.4% because CFA Institute gave more focus to it in 2013 and they asked 10% of it both in CFA level II and CFA level III in that year. But after that, the weight in the exam had been again closer to 5% only. Only one chapter is there and also it is a very easy read. You shouldn’t lose any point from it because it is most likely to be asked in the afternoon exam.

Risk Management And Derivatives: A total of 11-12% from this area. There is one chapter of risk management and three chapters of Derivatives (futures/forwards, options, swaps). It is a conceptual topic. Questions would be both conceptual and numerical. It is one of the areas where you can score even full marks in the essay exam. You must score well in this area.

Trading, Monitoring, and Rebalancing: Around 4-5% from this topic. A very easy topic but a relatively newer one for the candidates as nothing of this has been discussed in the earlier levels of CFA. The question would either be in the morning exam or in the afternoon exam. Generally, if they ask this area in the morning exam then they are going to ask the next chapter (Performance Evaluation) in the afternoon exam.

Performance Evaluation: Very similar weights as that of the Trading and Rebalancing. The good thing is that the concepts are very easy for these two topics and if proper time is spent then 9-10% marks are there to pocket in from these areas. Revise these two areas again as you are more likely to forget concepts from these two topics than the other topics.

GIPS: They did not ask any item set from it in the 2014 and 2016 exam but asked questions in 2013 and 2015. They might ask questions from it again this year as well. You should not skip it. It is one of the easiest areas to score full marks. If you study this chapter from the curriculum book and do the 40 odd end of chapter questions from the book, you are more likely to score 6 out of 6 from this area. The questions will be not dicey like Ethics from this area. The questions will be straightforward and it is very easy to score 6/6 in this topic.


4 Months Study Plan for CFA Level III

Please download 4 months study plan for CFA level III from here – CFA Level III 4 months Study Plan

Wish you all the best for your preparations. For any queries, please mail us at or call us at +91-8800946384.

Strategy for CFA level III exam

Congratulations for passing CFA level II exam and welcome to the last hurdle of the coveted CFA exams. The pass percentage of CFA level III exam is around 50%. But don’t get complacent as the competition would be much fierce for this final exam. The exam consists of two 3 hours papers as usual. The morning half will be an essay based exam where you need to write the detailed answers in the workbook provided to you. There will be around 9-12 questions and each question will have 2-3 parts and the marks allocated would be ranging from 9-35 per question. The afternoon exam will consist of 10 item sets having 6 questions each (just like level II). The weight for both morning and afternoon exam is equal i.e. 50% (180 marks each).

The MPS (minimum passing score) for level III exam has been around 65% for past few years. If you score more than 70%, then chances of passing the exam are almost certain. So, we need to target at least 70% mark. 70% marks can be targeted using various combinations- Morning marks/Afternoon marks – 40%/100%, 50%/90%, 60%/80%, 70%/70%, 80%/60%, 90%/50%, 100%/40%. Getting 100% marks is almost impossible in both morning and afternoon exam. Getting a 90% in morning exam is also too difficult as per the historical pattern of candidates’ marks. So, we are left with these options – 50%/90%, 60%/80%, 70%/70%, and 80%/60% which basically implies that the marks in the morning exam can range from 50%-80% and that in the afternoon exam can range from 90%-60%.

Importance of afternoon exam:

The afternoon exam is very important for passing the exam. If you fail to score more than 70% marks in the afternoon exam, then the probability of failure increases. It has been observed looking at the past results that candidates who perform poorly in the morning exam can still pass the exam but the candidates who perform poorly in the afternoon exam generally end up failing. If you know everything in the morning exam, the chances are that you would still end up with 70% marks only but that is not the case with the afternoon exam. If you know everything in the afternoon exam, then you will definitely score more than 90% marks. While preparing for the exam, candidates generally tend to focus too much on the essay type questions and less on the item sets. Almost every candidate is too much focused on tackling essay type questions. Although the essay type questions are also important and should not be ignored but the item sets are more important.

Morning Session: Essay Based Questions

Before starting the preparation it is advisable to go through the previous actual exam papers. CFA Institute uploads the actual morning exam papers for last 3 years along with guidelines answers on its website. You can download those papers from here. Just go through all the question papers and get an idea about the types of questions asked in the exam. As you can see that around 80 marks (45%) have been asked from the readings – Portfolio Management: Individual and Institutional. These readings are the backbones of the morning paper. Everyone knows that but still most of the candidates fail to score more than 70% marks in questions related to these readings. The main reasons behind this are a lack of understanding of question and command words. Every candidate must go through the list of command words and ingrain those in your mind.

Each question will be having the number of minutes with it. The number of minutes is nothing but the number of marks associated with that question. There are total 180 minutes. It is advisable that candidates do not spend more than the allocated amount of minutes to a question. Try to keep a standard deviation of fewer than 2 minutes per full question. Otherwise, you might not be able to attempt all the questions and the unattempted question might be the easiest one out of all.

Another important thing is to answer the question where it needs to be answered. There have always been few cases each year where candidates get less than 50% marks in almost all the morning exam questions because of answering the questions at the wrong location. After reading each question, just flip the pages till you see the next question. Most of the times you will find some space where you need to mark the answer and then state the answer in the blank space provided.

All the questions must be read carefully. Some small words like pre-tax, post-tax, real/nominal make a lot of difference to the answer and can reduce the calculations significantly. For example, the question would be to calculate real interest rate required for the pension plan for the next year. But if we miss the next year part, we might end up wasting a hell lot of time thinking that we need to fulfill the liabilities for the entire pension period.

Another important thing to consider is the calculations. Candidates tend to be in the habit of using the financial calculator and just write the answer without explaining it. Just think if you get your answer little wrong and do not show any calculation, then most likely you will not get any marks for the question. However, if you show the calculation and make an error in one of the entries, you will be given partial credit for your solution. Always write the formula and the readings related to that formula on the paper.

Handwriting plays an important role in the morning exam. Most of the exam checkers are retired pharmacists or have experience in understanding the worst kind of handwriting. But still, you can save yourself a considerable amount of marks if you write neatly and in bullet points and highlighting the keyword or writing the keyword more cleanly. Most of the candidates face the issue in time management in the exam. So, the good handwriting becomes bad and the bad handwriting becomes worse in the exam. Practice is the key to learning about the time management. You need to attempt at least 3-4 mock tests and try to finish the mock tests in 2 hours 45 minutes so that you can finish the actual exam comfortably. Finishing the exam will make a lot of difference. If you happen to miss few marks due to mismanagement of time that can affect your performance in the afternoon exam.

Each question is graded by a different examiner. So, do not think that the bad performance in one section would impact the grading in the other sections. Also, do not try to impress the examiner by your knowledge by writing additional stuff which is not required. If the question asks for 3 reasons, give only 3 reasons which are most relevant. You are going to gain nothing by impressing the examiner in one question and leaving other question ill-attempted or unattempted.

It is very important to study from the curriculum books. If you are planning to study from some other third party content provider, then please at least go through the entire curriculum once to see whether they have missed something or not and try to cover that part from the curriculum book. In CFA level I and CFA level II exam, it is easy to manage that part in the exam as the questions were multiple choice and one can always make intelligent guesses. But it will be totally different in the morning exam where you have to give constructed responses. Even if you manage to guess intelligently and write the answer successfully, it will certainly lead to wastage of precious time to think about the answer. The exam setters have the habit to ask around 10% of the questions from the part which you might have never seen while studying from the third party content.

It always becomes tense during the last phase of preparation when only a few days are left as candidates tend to forget the curriculum. They fear that they would forget the curriculum and might not be able to write the constructed responses. But most of the times these fears are misplaced. One should remain confident. As one can see that around 45% of the questions would be asked from Portfolio Management : Individual/Institutional/Behavioral Finance and most of the stuff asked would be direct from the text. So, there is no need to panic at all. Even if one scores 70% in that 45% and score only 50% in rest 55%, he/she would end up getting around 59% marks in the morning exam and those marks will be more than enough if one can perform well in the afternoon exam. Even if we do not consider the afternoon marks, 59% marks in the morning exam would be above the MPS for the morning exam paper. So, it is very important to keep your cool and tackle the problems like a peaceful warrior.

Afternoon Session: Item Set Questions

Morning exam is not the end of the paper. Even if you perform badly in the morning exam, do not let your confidence shake for the afternoon exam. It happens with many of the candidates that they are not able to complete the morning exam and leave 10-20 marks worth question unattempted. But there is nothing to worry. Just think like that. If you can score 60% in rest of 160-170 marks paper, you would end up getting around 55% marks and you need to get around 75-80% marks in the afternoon exam to clear the hurdle. Scoring those many marks is not that difficult in the afternoon exam if you manage to curtail your silly mistakes and have covered the curriculum really well.

Ethics and GIPS have additional importance in the afternoon exam paper. Most probably you will end up getting 2 item sets on Ethics and 1 item set on GIPS. Scoring well in Ethics can make a huge difference because of Ethics adjustment. It can be the difference between getting a band 10 and getting a pass result. One has to remember many things in GIPS and its weight is only 5%. But still one should not leave it. One or two more right answers can make a huge difference. They can shift you percentage score from 63% to 65%. Make use of flash cards but do cover every topic in GIPS. The questions asked in GIPS item set will most likely be straight forward and can definitely boost your score.

There are only a few numerical questions that can be asked in level III exam and you are most likely to find almost all of that stuff in the exam. So, be better prepared for that. CFA level III curriculum is short on quantitative topics and has many theoretical concepts. There are hardly 25 types of topics which require calculations. Make different notes for those topics and revise them again and again. You can easily improve your score by around 5% by following this strategy in the afternoon exam.

Practice enough item sets for your preparation. Try to improve your score to 80% in mocks. 80% targeting will cover the bad performance in the morning exam. You can study more about how to tackle the item set questions from here.

Sometimes it becomes all too difficult during the last days of preparation before the exam. But you need to push yourself as someone has rightly said – The ones who push the limits sometimes discover that the limits sometimes push back. This is the last hurdle for you. Give 100% to it. There is always a rainbow at the end of every storm. Wish you success and good luck.

Please download the 4 months study plan for CFA level III from here.

Please read the strategy for attempting CFA level III morning exam here.

How to attempt Item Sets in CFA exams?

The questions asked in CFA level I exam are stand alone questions where the candidate has to attempt one question at a go. It is a very simple format and candidates do not find it chilling. However, in CFA level II and CFA level III exams, it becomes little tricky as the questions are in item set format.

The question format (item set) can play a vital role between pass and fail. Most of the candidates are very comfortable with the individual question format and can easily score more than 80% in that format. However, if the same questions are given in item set format, the accuracy falls down to 60-65% level or may be even lower than that. Many candidates do not get enough practice of item set kind of questions and end up getting a band between 8 and 10. Those bands hurt a lot when you are so close and yet so far. I know few candidates who got a band of 9/10 in consecutive attempts even though they knew the syllabus inside out. They are generally not comfortable with the exam format.

So, it becomes very important to practice enough of item set kind of questions and to make a good strategy for attempting the item set. There are few basic strategies which you can follow but you need to practice enough to make a customized strategy for yourself. (Doesn’t this customized word always remind you of forward contract? Maybe I am drunk on curriculum books!)

Some important details about item set kind of format: Many candidates are worried about that if they get one question wrong, they might get all of other questions wrong in the item set. Haven’t you ever thought, what would happen if you get one data wrong and end up doing the entire item set wrong? For example, you mistakenly calculate the change in working capital in Equity and end up making all of your FCFF/FCFE calculation wrong and all questions might be based on that. If you fear that, then I have some good news for you. You need not worry about that. CFA exam makers understand that very well. Rest assured that by mistakenly calculating one thing wrong won’t have a huge impact as most of the questions are independent of each other. So, if you are using a prep provider where you are getting all the questions wrong because of one silly mistake, then that prep provider has not done justice with their content.

There is a high probability of getting at least 2 completely theoretical questions in an item set even if the item set is testing Quantitative Methods or Derivatives. It is a general myth that it is easy to score well in theoretical questions. The theoretical questions are generally conceptual and difficult to attempt successfully. Candidates generally tend to make silly mistakes in theoretical conceptual questions because the other wrong option looks almost correct especially for the subjects like Ethics and Corporate Finance.

Many candidates find it difficult to finish the paper in 3 hours. Let me tell you how the panic would set in last 30 minutes or so if you are not well prepared. If you have a habit of skipping question which you couldn’t get hold at in first go and come back to those questions at the later stage. This strategy works really well for the level I exam. But it can backfire in level II exam because when you come back to the question again, you might have to again read the entire item set. Suppose you skip 10-12 questions from 5-6 item sets and last 30 minutes are left. It can lead to a panic button at this stage. But there will always be some questions where you won’t be sure. What to do with those questions? Is there some way out? Well, that depends on from subject to subject. The pressure makes Manchester United to score consistently in last few minutes of the game and the same pressure makes the South African Cricket teams to choke and to snatch defeat from the jaws of victory. However, the best way to deal with it is to practice so much so that you have enough time left (around an hour) for those few remaining questions.

Let’s discuss few of the strategies which have been used by many candidates in the past with mixed results. One of these strategies (may be in tweaked form) can be effective for you as well.

The Genius Strategy: Well, some guys are the genius kind. They are so comfortable with the curriculum that they happen to solve the entire paper in 2 hours and generally end up scoring more than 70% marks in 8-10 subjects. If you are that kind of person, then it is advisable that you recheck your calculations again not at the end of the exam, but after solving each item set. That would save a considerable amount of time and effort in the end. You can skip doing that in between as well if you are going slowly on the exam. It is also advisable that you attempt your weak areas (if there are any) in the middle when the concentration tends to be maximum. Leaving the weaker areas for the end would not do any good.

The Conformer Strategy: This is the most basic strategy which is generally used by the people who haven’t tried any other strategy to solve the exam. But still for few candidates, this could be the ideal strategy. Simply read the complete item set, underline the important points (where there is a possibility of a trap), then, attempt each question one by one. This strategy is ideal for guys who have a good reading comprehension capability and can read at a faster rate. A CFA item set would have around 400-500 words and on an average two Exhibits with some data. A guy with a good reading speed can finish the reading part in 3-4 minutes and comprehend that as well. Now, each question can be given 2 minutes. Attacking and solving the topics in which you are comfortable in the beginning is a good way to execute this strategy. If you can solve 5 item sets in 60-75 minutes, there is nothing like that. This strategy can lead to pa panic button at the end of the exam. So, it is very important to write the details about the question when you plan to skip any. For example, you plan to skip a question on calculation of percentage of active portfolio in an optimal portfolio in Portfolio Management (Please don’t ask me whether this could come in the exam or not. If anything is given in the CFA curriculum books and they have not explicitly mentioned that it will not come, that part can come in the exam), then you can write in the exam that for solving that question, you would need to read this paragraph only or this Exhibit so that when you come back later, you don’t end up wasting a good amount of time in solving that question.

The Cheater Strategy: Few of you might not have cheated in the exams. So, let me explain to you what this strategy is all about. The cheater here doesn’t mean that the person doesn’t know anything and is entirely dependent on the other guy’s answer sheet. The cheater here refers to people who have the brain which if shown some important word (clues) or phrase, can remember everything related to it. So, by looking at few words, the cheater can remember most of the things and can write that in the exam. Now, this is not a subjective exam. But it is important to use this strategy in the objective exam as well. They have such brains that if they get few key words in their mind, their mind can subconsciously work on the answer. For that to occur they need to give a look to the questions in the item set in one go and it should not take more than 30 seconds. There will be few key words which will click in their mind and that would make all the difference. While reading through the item set, their mind will be hunting for the answers for those questions subconsciously and they would be in far better condition when they come back to solving the questions.

Backward Induction Strategy: Don’t shoot me if this reminds you of valuing interest rate options using the Binomial method. But that’s how it works for most of the fellows. They tend to concentrate more when they are aware of the questions. Many successful candidates have executed this strategy. Read the questions carefully before reading the item set. Then go back to the item set and as soon as you get the answer for any question, just mark the answer and keep on reading. There are many ways to execute this. So, it requires a lot of tweaking.

One way is to read few of the questions which you can retain rather than reading all the questions. For some candidates, this is the optimal strategy (Yes guys, even here also we need to find the optimal strategy with the highest Sharpe ratio). Another way can be to read the numerical related questions only or non-numerical questions only and then try reading the item set. Some strategy involves even reading of options as well apart from reading questions especially in the case of subjects like Ethics where the options are more important than the questions.

Wheat and Chaff Strategy: Some guys have developed a good habit of acquiring the gist of anything by just looking at it. Some guys are good with numbers and they can run through the entire item set by looking at the numbers only and catching the important details from Exhibit and other such things. These guys have a habit to quickly run through the 400-500 words item set in 1-1.5 minutes. Then, they can start attacking questions and giving more time to questions rather than reading the item set. Some guys are the master at that. For them, the item set behaves like a single individual question.

This strategy can be developed with enough practice. Once you have practiced enough, you tend to know that what would be running in the examiner’s mind while setting the item set. And then you need not read the redundant part and just read the part which is necessary for solving the questions. If you can separate the chaff from the wheat, it could lead to lots of time saving. And that saved time can be applied in your weaker areas.

Mixed Strategy: It is not necessary to apply the same strategy for every subject. One can have a different strategy from the above for different subjects. For example, one can go with Wheat and Chaff strategy for subjects like Quantitative Methods and Equity Investments and Backward Induction Strategy for subjects like Ethics and Economics.

To find an optimal strategy for yourself, you need to practice enough item sets. And the best thing with that practice is that it would further improve your chances of passing the exam. The best item sets can be found in the curriculum books, current year mock exam, and previous years’ mock exams. Try to finish those first before moving to any other prep provider material. You can refer to this for free practice of item set questions. I hope you guys can find a way to maximize your score in the exam and you do not have to painfully wait for 2 months (like the borderline candidates do). I hope that after attempting the exam, you are dead sure of clearing the exam. I wish all the best for your preparations. Stay focused.


How to finish CFA curriculum in 2 months?

80 days are left for June CFA exam. Most of us would have finished around 50% of the curriculum so far. However, there will still be plenty of souls who haven’t got adequate time to devote for the exam preparations. Some guys even wouldn’t have opened their books and they are waiting for some miracle to happen so that they can start their studies. They definitely want to start the studies but they are better in excuse making. That’s why they keep making excuses for themselves.  With each excuse, they are building pressure on themselves and now they are afraid of even starting. This post is dedicated to those guys who haven’t started yet and are in a dilemma whether they would be able to do that or not.

It is very important to finish the first reading of the curriculum at least 20 days before the exam so that we can sufficient time for practicing mock exams. So we have only 60 days left. Many of you must be contemplating whether to defer the exam or give it a try. Just remember that half-hearted effort is most likely to end in failure and utter disappointment.

People are so afraid of failure. So afraid that they quit before they started. But you guys have do understand it’s not about failing. It’s about raising each and every time you did. Nobody I repeat nobody you know from television or books who is successful is fail-free. In fact those are the people that failed a lot. Because they never gave up. Because they always focused on what their goals were. Success doesn’t come overnight. It comes from hard work and dedication every single day. Nights. You don’t prosper from day one to day two. It takes weeks, sometimes decades. Your goal, no matter how high it may be, is reachable for everybody the only question is how much time and energy are you willing to spend. What are your priorities. If priority number one is and has been the thing you want to accomplish you will don’t worry about that.

The answer to your question whether it could be done in 2 months is a big YES. It can be done and many people have done it in past. All you need is right strategy and focused approach. Just remove all the doubts from your mind. Think of the greatest thing ever done by you so far. Compare that to this and you will find all the motivation to give it a try. The hardest thing is to start but once you are set, everything will fall into place. Don’t listen to any person who belittles your ambitions. An enemy is better than a friend who keeps on belittling your ambitions and wants your company in failure.

Don’t ever let somebody tell you that you can’t do something. Not even yourself (your own mind sometimes acts as a limiting factor. Break those limits). People can’t do something themselves. They want to tell you that you can’t do it. If you want something. Go get it. Period.

Strategy for CFA level I: 60 days – 67 reading. Maximum weight areas are FRA (Financial Reporting and Analysis) and Ethics. These two subjects constitute 35% of the exam. FRA has 14 readings. But first 3 and last 3 readings can be done in 2 days and are not that important for the exam point of view. The middle 8 readings are the crux. Each reading can be easily done in a day with proper practice. It will take 5-6 hours to read and solve the practice questions provided at the back of the chapter. Keep noting important formulas in a separate notepad. It will help you a lot during revision and will reduce your revision time by more than 50%. FRA needs 10 days. Either you can start with Quantitative Methods or you can start with FRA. It will depend on your background. If you are from a non-mathematical background, try starting it from FRA as Quant can consume a lot of time. You can break your FRA in two halves. In the first 5 days, read first 7 readings and last 7 readings in other 5 days (may be during the later stage of your preparation so that you do not forget anything about FRA).

After FRA, the basics of quant should be done which involves the present value of money and discounted cash flow (NPV and IRR). With these two readings, you can finish the 6 readings of Corporate Finance as well. These 8 readings could easily be done in 5 days. For Ethics, you can set 1 hour daily and finish it along with all the other subjects. By doing this you will be having enough of a practice of Ethics questions which will help you a lot in the end.

Quantitative Methods and Fixed Income has a weight of 11.66% each in the final exam. Economics and Equity have 10% weight each. After doing half of FRA, Quant basics, and Corporate Finance, you can attack Equity or Fixed Income. Equity is small and mostly theoretical and can be easily finished in 5 days. Fixed Income is little lengthy and it would take 7 days of yours. Do not forget to practice enough questions. After these subjects, move on to rest of the Quantitative Methods and Derivatives. These two subjects can be finished easily in 6 days and 4 days each considering you are devoting 5-6 hours daily. Now try doing Economics. Economics is too lengthy for its 10% weight. Selective reading would be good or try studying it from some prep provider so that you can read the concise version of it. Do not devote more than 8 days to it. Now 40 days are over and you are left with half of FRA, Portfolio Management, and Alternative Investments. You can easily do rest of the FRA in 5 days. Portfolio Management has 4 readings out of which 2 are very small. It won’t take more than 3 days and AI can be done in 1 single day. So, you can easily finish it off in 49 days. Rest 11 days can be devoted to your weak areas, practicing more questions and reading Ethics again.

Last 20 days should be spent on 2 revisions. First revision will take 10 days and the second will take 3-4 days. Try to attempt at least 4-5 mocks before the main exam. Once you’re done with it, the chances of success will improve a lot. It is that simple. 5-6 hours a day for other subjects. 1 hour daily for Ethics. Total of 6-7 hours daily for next 80 days and you are through. Now don’t give another excuse that you have an office to attend. 6-7 hours daily makes 45 hours for a week. If you can study 12 hours on weekends, then you need to study only 4 hours on weekdays which is manageable. You have to do it no matter whatever it takes it to do.

You can download the study plan for CFA level I from here.

Strategy for CFA level II: 60 days – 56 readings. Equity and FRA have the highest weight and they are the easiest of all the subjects with Corporate Finance as one exception. The good thing is that you can start from any topic as almost every subject builds on from the material you studied in level I curriculum.

Equity has 8 reading and first 3 readings are very small and can be finished in one single day. Rest 5 readings can be finished in 6 days assuming 2 days for the most important reading i.e. Free Cash Flow Valuation. FRA has a total of 8 readings. Last 3 reading can be done in 2 days and first 2 readings in 2 0days. The most important readings are Readings 19, 20 and 21. There is 90% chances that you will get at least one item set from each of those 3 readings. Master those three readings in 5 days. Practice enough of item sets questions provided at the end of the curriculum books.

These two subjects constitute 40% of the exam. Keep on revising them. Note all the important formulas and results on a sheet of paper and spend at least 30 minutes daily in revising those. These will take 16 days of yours. After these two subjects, Derivatives, Corporate Finance, Ethics, and Fixed Income have 10% weight each. Derivatives (6 readings) can be finished in 8 days. Corporate Finance (5 readings) can be finished in 5 days. Ethics (10 readings) can be finished in 5 days. (Spend more time on the new reading for level II which were not there in level I) Fixed Income (6 readings) can be finished in 8 days. You still have 18 days left for rest 4 subjects which have a weight of 5% each in the main exam. Quantitative Methods (3) readings can be done in 3 days. Economics (3 readings) is the simplest of all once you have understood derivatives) and can be easily finished in 3 days. Alternative Investments (4 readings) can be done in 3 days. Portfolio Management (3 readings) can be finished in 3 days. So, everything would be over in 54 days. Practice is the main thing after that. Practice lots of questions and spend lots of time on the 6 topics which have 80% of the total weight.

You can go through this article for a detailed strategy to finish CFA level II curriculum in 2 months.

Strategy for CFA level III: 60 days – 43 readings. This is the toughest level of all and if you are from an accounting background, you will find it relatively tougher to crack as there is no weight given to accounting subject in level III. It is also different from the level I and level II and it has one subjective exam as well. The best strategy to crack the exam is to go through the previous years’ mock exams. The questions in the exam will be almost similar to the questions provided in the mock exams. Once you can master those questions, no one can fail you in the subjective test.

30% of the subjective paper will come from the Portfolio Management – Individual and around 20% will come from the Portfolio Management – Institutional. So, you know which areas you need to master. Devote enough time on those 2 topics as you will find 10% more of those in the objective paper. Those two areas can be mastered in 15 days. Read them slowly and practice the questions by writing on a sheet of paper. That will make a lot of good to your confidence. Once you are done with these two areas, rest is easy and fun to read.

The first book and the last book that are related to Ethics and GIPS respectively, generally comes in the objective paper only and constitute 30% of the objective test. GIPS is too lengthy and weight is also less. So, spend the time accordingly. By looking at the previous mocks, you will have a good idea what all things you need to study carefully. One should not spend more than 8 days in these two readings.

Rest all of the readings concerning with portfolio management, equity, derivatives, economics and fixed income are fun to read. You will learn a lot in those readings and if you have mastered the concepts in level II, you can finish all of those readings very quickly. If you are weak in your concepts, try to study them carefully and assimilate all the learning. The subjective exam will be highly conceptual unlike level I and level II. So, proper understanding is very important. All of these readings can easily be done in 35-40 days if you can spend 5-6 hours on a daily basis.

You can go through this article for a detailed strategy to complete curriculum for CFA level III exam in 2 months.

If you haven’t registered for the exam yet, tomorrow is the last day for registration for the June exam. Do register for the exam and give it a go. Start the preparation from today itself. everything would be fine in next 60 days.

If you wanna start then start now “I’ll start tomorrow” is a lie!! And you know that. No excuses anymore, no tomorrow anymore. There’s no tomorrow. There’s only today.

So, start today. Open up your books. You have neglected them for such a long time. But they never said any words to you. They are not angry with you. They are waiting for you like a lover. Go on and fall in love with them.

Also, remember that pain is temporary and pride is forever. All the best. Success will be yours.

What can CFA candidates learn from ‘The Parable of the Talents’

The Parable of the Talents is one of the well-known parables of Jesus.  In the parable, the talents refer to the money (gold). But it can be equally applied to other talents as well. The CFA candidates can learn a lot from the story. The story goes like this:

The Parable of the Talents

Again, it will be like a man going on a journey, who called his servants and entrusted his property to them.  To one he gave five talents of money, to another two talents, and to another one talent, each according to his ability.  Then he went on his journey.  The man who had received the five talents went at once and put his money to work and gained five more.  So also, the one with the two talents gained two more.  But the man who had received the one talent went off, dug a hole in the ground and hid his master’s money.

After a long time, the master of those servants returned and settled accounts with them.  The man who had received the five talents brought the other five.  “Master,” he said, “you entrusted me with five talents.  See, I have gained five more.”

His master replied, “Well done, good and faithful servant!  You have been faithful with a few things; I will put you in charge of many things.  Come and share your master’s happiness!”

The man with the two talents also came.  “Master,” he said, “you entrusted me with two talents; see, I have gained two more.”

His master replied, “Well done, good and faithful servant!  You have been faithful with a few things; I will put you in charge of many things.  Come and share your master’s happiness!”

Then the man who had received the one talent came.  “Master,” he said, “I knew that you are a hard man, harvesting where you have not sown and gathering where you have not scattered seed.  So I was afraid and went out and hid your talent in the ground.  See, here is what belongs to you.”

His master replied, “You wicked, lazy servant!  So you knew that I harvest where I have not sown and gather where I have not scattered seed?  Well then, you should have put my money on deposit with the bankers, so that when I returned I would have received it back with interest.

“Take the talent from him and give it to the one who has the ten talents.  For everyone who has will be given more, and he will have an abundance.  Whoever does not have, even what he has will be taken from him.  And throw that worthless servant outside, into the darkness, where there will be weeping and gnashing of teeth.”

– Matthew 25:14-30 (NIV)

The candidates can learn a lot from the above parable. Below are the few essential learning lessons which CFA candidates can take from it:

(1) Everyone has a different starting point. It’s not about the start but the end that counts: Each servant had a different starting point. But at the end, they were rewarded because of their gain over the starting point and not overall wealth. The story would have been more interesting if the servant with five talents would have done nothing instead of the one possessing only one talent. The parable wants to bring home the point that one should not crib over the start. Rather than wasting time on lack of talent or resources, one should make full and efficient use of the resources.

Every CFA candidate has a different starting point. Many candidates have a prior finance background, many don’t have any finance background. Many are working full time while others are not working at all. Many have other exams or responsibilities as well along with the CFA exam while others have only the CFA exam. But one should not just give up saying that it’s too much for them. They are already way behind the race. They can’t succeed. Confucius says : “He who says he can and he who says he can’t are both usually right”. If you think that you can’t succeed then you shouldn’t have registered for the exam.

Whatever be your starting point, the thing which matters the most is the end result i.e. whether you’ve been able to succeed in the exam or not. The gain in always incremental. If the candidates invest their time in learning rather than cribbing over the lack of things, there is a high probability that they will succeed.

(2) Don’t become complacent: In the story, the first servant didn’t become lazy. He had got five talents. Even if he hasn’t worked hard, he would have been ahead of the other guys. But still, he worked equally hard like the second servant. Similarly, the candidates with a prior background in finance, should not become complacent and stop studying thinking that they know everything.Remember that more is expected of those who have more. The candidates with a prior background in finance should help other guys in clearing their concepts. The knowledge increases with sharing. The knowledge is like seeds of trees. If the seeds are not spread over the fields and kept into a room, they will eventually become worthless. While the ones which are spread and sown in the fields, will blossom into large trees giving fruits and shade.

I have seen many candidates who even after possessing many talents, failed to clear the CFA exams and eventually gave up their dreams of becoming a CFA charter holder in between. The servant with two talents with little bit more effort will eventually catch up with the servant with five talents. Even in the story, both servants were treated equally by the master. They were treated equally because both performed according to their strengths and talents. In the CFA exam, if you perform according to your talents and put adequate required efforts, then no one can stop you in clearing the exam.

The candidates with more skills can be better off by helping other guys. This will not only help themselves to understand the subjects more clearly but they will also make lifelong friends in the process. In the process, they will increase their talents and there will be a lot of abundances and everyone would be better off because of it.

(3) Get out of your comfort zone: The master reprimanded the third servant even though he returned all the money back safely. It was because of the reason that third servant remained in his comfort zone and was afraid of the fact that he might lose that money or talent as well. He would have been appreciated by the master even if he would have lost that talent. the master called him wicked and lazy because he didn’t use the talent given to him.

All of us are given one or other talent. But we generally ignore those talents and always underutilize them. To get the most of your talents, you should get out of the comfort zone. There is one saying which goes like: “If you want something you’ve never had, then you’ve got to do something you’ve never done.” To succeed in CFA exams, you have to do something extra which is needed for the exam. The servants even if they would have lost their talents, would have been rewarded by the master because they kept faith in themselves and tried for achieving more. The CFA candidates should also get out of a fear zone. Don’t ever think that you’re going to fail. Just think about the learning. You will learn a lot during the process. Failure and success are just a stepping stone. Eventually, you will succeed if you keep faith in yourselves and pursue your dreams with full focus.

(4) Make the best use of your talents and create abundance: In the parable, the first and the second servant made the best use of their talents. They both earned 100% return on their investments. It was not mentioned that they were to keep the earned the money for themselves. But still, they worked hard and earned for their master. Their true reward is to share in their master’s happiness.  So happiness is the reward, and happiness comes from serving others.

The CFA candidates can also help and create a win-win situation for all. Life is not all about competition. The actual success in life is not to gain certifications and high paid jobs. The success lies in the happiness which comes from serving others. Why should we miss any chance to serve others? Share your learning with everyone. It will create a suitable environment for all and eventually everyone will succeed. The guy helping others the most will gain the most in the process as he/she would be knowing almost everything about the subject. More opportunities will come to the guy who will help others without expecting any reward and his/her business will grow so much that it would be very difficult to manage that.

I hope you learn something from ‘The Parable of the Talents’. If you apply this in your life, I am sure you’ll do much better. Wish you all the best.

Why do candidates fail in CFA exams and what to do about it?

CFA Institute declared the result of June 2012 CFA level I exam yesterday. Only 37% of the candidates could pass the examination. The pass rate was 1% lower than the pass rate of June 2012 CFA level I exam. The pass percentage rate has varied from 34% to 46% for CFA level I in last 5 years. Both 34% and 46% pass rate came in the same year (2009). CFA Institute might have set a lower MPS for June 2009 exam which led to a passing rate of 46% and they set a comparative higher MPS for the December 2009 exam as only 34% could pass the exam. I guess you probably got the point. To clear the CFA level I exam, you need to be in top 35% of the candidates who sit for the exam. Generally, 25% of the candidates do not sit for the exam.

CFA is not an exam to check your intellect or mental ability. It’s not a SAT/GRE/GMAT exam. This is an exam which checks your knowledge. The curriculum is comprehensive. To succeed in the exam, you need thorough preparation and must be comfortable with almost all the areas to be asked in the examination. That’s the only reason why so many brilliant guys have failed to clear the exam. They just couldn’t devote the required time to clear the passing line. Below are the five most common reasons for failure in the CFA exam:

(1) Wrong targeting: Almost 80% of the candidates suffer because of the wrong targeting. Generally, the first question asked by the candidates is that how much they need to score to pass the exam? They soon find the answer that the MPS has been around 62-67% over the years. They target the score of 65%. Few candidates even target a score of 70% and they generally feel complacent after getting a score of 65% to 70% in the mock exams and do not push themselves more. Generally, they tend to give one mock exam (3 hours duration) at a time and the main exam is of 6 hours duration. The conditions are very much different in the main exam. In mock exams, they tend to get the similar questions what they have studied in case they attempt the mocks from the same vendor from which they are studying the CFA curriculum. In the main examination day, because of excess pressure, newer questions, and two exams of 3 hours duration tend to decrease their marks by 3-10% and they are the guys who generally end up with a score band of 8 to 10.

How to correct it: It is very easy to correct this one. The candidates should not keep such lower targets. It would be best if they can keep the target as high as possible i.e. 100%. But to be rational, a target of at least 75% marks should be set while attempting the mock exam. Practicing 2 tests of 3 hours each on a single day can also benefit a lot.

(2) Comparing yourself with peer group: It’s good to form study groups and to take inspiration from the best guy in the group. But the problem arises when you’re the best guy. It can happen that all the group fails to clear the exam. It’s not a good habit to improve yourself just only to become the best one in the group. Sometimes the candidates fail to make full use of their potential and underutilize their skills. They think that if they fail then everyone in the group will fail. That’s certainly not a good thing to make targets.

How to correct it: Rather than focusing on topping the group, focus on improving yourself. It’s perfectly fine to have competitive nature and to be the best in the group. But there is sample biasing in the group. The group might be smaller enough compared to the number of candidates sitting for the exam. The best way would be to target a particular score and once you reach the target, keep on increasing it by 5%. By doing it on a consistent basis, you soon will be touching 90% limit and then no one can stop you.

(3) Setting unrealistic goals: Many bright guys fail to clear the exam because of unrealistic goal settings. They overestimate their skills and the time they have with them. They would have passed all the engineering or some other graduation exams by studying one week or few days before the exam. So, they think that they can do that with the CFA exam as well. I understand that there are few guys who could do that but only those who knew the content of curriculum inside out. The exam is different than the normal exams because here we have to study and remember 10 subjects at once. That makes it one of the extreme difficult exams to crack.

How to correct it: Prepare a proper time table and work according to that. Give adequate time to each reading and set the time allocated to each reading according to your capabilities. It varies from 200 hours to 600 hours depending upon various factors. Set some additional time for unexpected events as well as anything can happen which is not in your control. It is ideal to complete the course curriculum at least 4 weeks before the exam. After completing the curriculum, one can revise 2-3 times before the final exam and that would make you feel very confident and comfortable before the exam. Many guys fail only because of the panic of the exam. If you’re not panicking, you’ve already won the half race.

(4) Perfectionist attitude: It’s okay to be a perfectionist. But often the cost of being a perfectionist is too high. The candidates read the CFA curriculum and realize that everything about that topic has not been covered in the curriculum. They look for the additional readings and spend a lot of time in reading those. This consumes a lot of time and they start lagging behind the schedule. Eventually, they leave few subject or study very little about those subjects which lead to failure.

How to correct it: It’s very good to be curious and study and understand the subjects deeply. But one should not deviate from the timetable. It’s always better to finish each and every reading as per the time allocated to that reading. If you really want to study the subjects in detail, then set additional time for those readings. The time can then easily shoot up to 1,000 to 1,500 hours. You must be having that much time to become a perfectionist. That is the cost which you have to pay for that. Or you can study those additional readings after the exam. The time between the exam date and the exam result date is ideal for that.

(5) Leaving practice questions for the end: Many guys tend to leave practice problem for the end. They just read the curriculum without solving any problem. They think that they will do these problems at the later stage after completion of the curriculum. But that day never comes. Even if that day comes, it’s not a good thing to do. You don’t get to know about your strength and weakness unless you solve problems after finishing each reading. At the end, if you find your weakness in some subjects, then there is no time left to improve upon that.

How to correct it: There is only one way to correct it. That is to solve problems as they come. It’s good to get a decent question bank and solve at least 2,000 practice questions along with the completion of the first reading of the curriculum.

(6) Wrongly interpreting your progress: The candidates read one reading and then attempt practice question of that. They score 70-75% marks on those practice questions and think that they are on the right path. But nothing is further from the truth. When you just finish the reading, it’s very easy to score 70-75% marks. But when you attempt the full paper comprising of all subjects, your performance tend to fall down.

How to correct it: While solving the questions after just finishing a reading, you must score at least 90% marks. If you’re not scoring 90% marks, then it clearly shows that you’ve not understood the topic clearly and a re-reading is necessary to work on your weaknesses. The target of 75% is okay when you attempt the mock tests but certainly not for the concept checkers after just finishing the readings.

Those were the few reasons because of which many candidates fail to clear the exam. If a candidate takes care of all of above mentioned reasons and set adequate time according to their capabilities, then no one can stop them in succeeding. I wish you all the best for your future. I hope you never fail in any exam from now onwards.


A blog of the NYU Colloquium on Market Institutions and the Leipzig Colloquium on the Market Order

Fundoo Professor

Thoughts of a teacher & practitioner of value investing and behavioral economics