The ultimate guide to passing your CFA exam

Half the people who take any CFA exam fail.

However, anybody can pass all three levels without being a Wall Street superstar nor a genius. All you need is some time to invest, a sensible strategy, and a strong commitment.

I spent the past three years compiling a strategy to maximise the CFA exam pass probability relative to time invested. Over this period, I passed all three CFA exams (including failing level III on my first try) and both exams of the FRM programme while working full time. I also took a series of other exams over the same period, which brought me additional insights on how to study efficiently. Against this background, I developed the guide below on how to optimally prepare for CFA-like exams.

The guide is divided into three parts: first I highlight what you need to know about the exam, then I review some basics on how to study efficiently, and finally, I describe the strategy that I believe is optimal to prepare for CFA exams.

Part I: know the enemy

As Sun Tzu famously puts it in the Art of War, “if you know the enemy and know yourself, you need not fear the result of a hundred battles”. Let us first assess “the enemy”, which is to say the endeavour that you are about to undertake.

The first thing you should know about CFA exams (similarly for FRM exams) is that they neither reflect how smart you are nor how well you know finance. They are merely an indication of how thoroughly you learned the curriculum and how effectively you prepared for each exam. It is, therefore, crucial to have a sensible study strategy. Of course, already knowing how derivatives work or being able to price a swap helps. However, no matter how many years you have been working in finance, you won’t make it unless you prepare thoroughly for each exam.

The second thing you should know before you engage on that path is the investment you are making. As more and more firms are paying for such certifications, the USD 2,000+ that you will spend for registration and study material are most likely not the main issue. The time investment is often overlooked and underestimated. As a rule of thumb, 300 hours is the average time studied by successful candidates for each exam (more on that below). You can quickly compute that with 90 minutes of study every day and somewhat more during the two weeks before the exam, it sums up to 6 months for each level.

However, it is not that simple. Have you ever been sick? Stayed at work much later than your usual bedtime? In such situations, adding another 90 minutes of study to your workdays would not be feasible. Even if you managed to spend this time in your books, it would not be productive. The reality is that many of your weekends will be dedicated exclusively to studying and that you may also need to take days off to reach the 300-hour goal, three times.

Beyond the time investment, one should also not overlook sacrifices that these exams imply. Consider what you will be giving up. Study time is time not spent with your significant other, with family, with friends or at work, each of which may be painful. Besides, the time that you manage to spend outside of the curriculum will probably not feel the same, because studying drains concentration and energy, limited resources for each of us. Coming back to Sun Tzu’s quote: know yourself. In this case, think carefully about whether you are ready to bear the heavy emotional burden to come.

Nevertheless, most CFA charterholders strongly recommend the programme and so do I. It is undeniable that the charter will help you understand finance better, make you stand out professionally, and provide you with a valuable network of over 146,000 charterholders. While the CFA programme probably sounds like a real challenge, be reassured: anybody can successfully finish the programme. It is not difficult, even if you do not have any background in finance. I did not either.

Part II: efficient study

Now that we know what we are up to, let us review some basics.

Establish a clear study plan. With many months of study for each exam, a plan is critical. I would recommend following the detailed plan described in Part III; however, you may prefer to compose your own. In any case, set a high priority on having one.

Study consistently. Scientific research on the optimal time of the day to study seems not to be pointing clearly in any direction. Some research argues that you should study early in the morning, other articles state that performance will peak a couple of hours after waking up, and others claim that memory retention will be at its best before sleeping. Some also argue that there are body types that have different optimal study time. What seems, however, to be unanimous is that consistency helps. Your body gets used to consistent patterns and adapts to it; I would therefore strongly encourage it. I personally always favoured waking up at 5:30 and studying for 90 minutes before heading to work. It has the advantage of enabling a high consistency, in addition to which, your productivity will not be undermined by an exhausting day of work.

Alternate your study building blocks. In the strategy that I suggest, there are three main “building blocks” to consider while studying: (1) read material, (2) study by heart, and (3) practice. One of the worst approaches would be to read the entire curriculum before practising with questions or mock exams. You need to include exercises in your routine as soon as you start. The best way to remember new concepts and formulas is to alternate between these building blocks. The time spent studying should, therefore, sound like: read new material, study formulas by heart, practice them with questions, review the content of last week, practice this content, review all formulas so far, read new material, and so on.

Think in terms of productivity, not just in time. A helpful notion of time is what I call “fully-concentrated equivalent”. Suppose that you come back from work, are tired but still have an hour to invest in studying. After that hour, you notice that you were not as productive as you usually are. In such a case, instead of recording one full hour of study, you should only record 40 minutes. Or 20 minutes. This is the time that would have been needed to be as productive as you were during the past hour if you had been under perfect circumstances. Only “fully-concentrated equivalent” time matters, not the time that you spend in the curriculum. In the remainder of the article, all time references represent fully-concentrated equivalent study time. I strongly encourage you to start using this notion as the standard for study time.

Afford free time. Advanced certifications are not sprints; they are marathons. At some point, you will most likely be late on your study schedule and may want to catch up by cancelling all other activities. While your commitment to success is praiseworthy, this approach is probably detrimental. I burned out the week before I took the CFA level III exam for the first time and I can guarantee that you do not want that. It cost me another year and 200 additional hours of study. A better approach is to plan free time and take the scheduled breaks no matter what. Plan an evening or a weekend off once in a while. Also, most importantly, do not feel bad about it; otherwise it will take all the benefits away. Enjoy your breaks fully.

Keep doing sport. Practising sport will improve your ability to concentrate, reduce your stress, improve your sleep, and will benefit you in many other ways while preparing for advanced certifications. There are legions of recommendable studies on the topic; here is one from Harvard Medical School. All in all: sport is not where you should spare time. Be careful with intensive training during the week before the exam, though, as it can exhaust you much more than expected.

Sleep more and consistently. As for sport, there are countless benefits you can get from sleeping. A great article by James Clear on the topic is available here. I could not recommend you more to read it. Long story short, sleep more and have a consistent sleep pattern. You will notice the difference in your performance. The closer you get to the exam date, the more critical it becomes.

The seven elements above cover the main aspects of how to prepare for CFA exams efficiently. However, should you want more tips, there are a few articles that I would recommend on the topic:

• CFA Exam Study Techniques: Which Ones Really Work
• How to Best-Guess CFA Exam Questions When Stumped (& Things to Avoid)
• 9 tips for passing the CFA exams from the man who writes the questions

Part III: the strategy

With the previous two parts in mind, we can now dive into the core of the topic. This part first reviews recommendable study material, then highlights the structure of an appropriate study plan, and finally describes the suggested study strategy.

The material

As study material for CFA exams, get Kaplan Schweser’s “Premium+ Package”. I know this is a considerable investment (1,499 USD as of 2017), but it is currently the best there is, and if it can spare you 100+ hours of study, it will most likely be worth it. By the way, I do not get any benefit from third parties for the products that I recommend. The package includes namely the following five useful items:

SchweserNotes: basically, that’s the curriculum. You will read them at least twice thoroughly before the exam. Great quality.

Six full practice exams: they may be the most critical part of the package and are vital to improving your score. The difficulty of the mock exams is similar to that of the real exam. Use them during the final month. They are fantastic.

SchweserPro QBank: thousands of practice questions that you will use during the entire study period. Some questions are irrelevant, but all in all, they are beneficial and key to your preparation.

Schweser’s Secret Sauce: a concise summary of the entire curriculum as a 200-page A5-format book. It is only useful once you have finished reading the SchweserNotes, but it will be gold during the final month.

3-day Review Workshop: an excellent summary of the curriculum and useful tips for the exam in a 24-hour video (3 times 8 hours) format. Very useful to get a full overview of the material and make links between topics. If you can afford it in terms of time, it is great to watch it during a weekend, about a month before the exam day.

Regarding the other items of the package, I would not waste any time with them. Some are arguably useless (Schweser’s QuickSheet, Schweser’s Study Calendar, Schweser’s Flashcards, SchweserNotes Audio MP3) and others are only marginally helpful but not worth the time investment (Candidate Resource Library, Ask Your Instructor).

Creating your schedule

While creating your schedule, think about the following tips:

1.      For someone without any financial background (as I was when I started): start early enough to study for 270 hours for level I, 310 hours for level II, and 350 hours for level III. Given the suggested study plan below, it yields 19 to 21 weeks of study for each exam. In other words: start end of January for the June exam and end of July for the December exam.

2.     Set your objectives per week, not per day. My recommendation is to plan to study for 8 hours over the time from Monday to Friday, every week. In addition to that, expect 12 hours of study time every second weekend (at best, 8 hours on Saturday and 4 hours on Sunday morning), while you take every other weekend “free” (only one hour a day). It will allow a healthy study-work-life balance while also providing you with enough time to master the curriculum.

3.     Take the week just before the exam off from work. During this week, study for 52 hours (8 hours a day from Saturday to Thursday and 4 hours on the Friday before the exam). Over 8 hours (of fully-concentrated equivalent) study time per day will not bring you much and is even likely to be detrimental. You are better off spending extra hours sleeping, doing sport or just relaxing.

4.     Keep a buffer during the last month to catch up possible delay, but do your best to avoid needing to use of this buffer.

5.     Studying every day for at least an hour is very important; not studying for several days in a row has a very negative impact on both motivation and memory.

6.     Stick closely to the schedule, including the breaks, in order not to burn out before the exam.

7.     When you start studying, read in the exact order of the curriculum (it is built in that way for a good reason) and do not skip any reading. It may sound obvious to most of you, but let me stress it anyway: you need to know each of the ten parts of the curriculum very well and cannot afford to skip any of them.

The study strategy

As you start reading the list below, it will seem relatively simple and straightforward, but stay with me until the end of it, and you will get the trick.

1.    Start by reading the first “Reading” in the SchweserNotes and solve Concept Checkers (not Challenge Questions) at the end of the Reading. Highlight the main concepts in the text and mark the Concept Checkers that you want to review; we will come back to them later.

2.     Do the same with the second Reading, then with the third one, and so on, until you reach the end of the first “Study Session”.

3.     Review the first Study Session thoroughly and do exercises (20 Q-Bank questions) on it. While answering practice questions, focus on not making any careless mistakes (e.g. misreading “least likely” with “most likely”). It is essential for the exam.

4.     Continue with the second Study Session the same way you covered the first one (items 1 to 3 of this list), then with the third Study Session.

5.     Here is the crucial trick: once you are done with the third Study Session, review Study Session 1 and do exercises (10 Q-Bank questions) on it. With “review”, I mean re-read what you highlighted and make sure that you master the key concepts and formulas. Regularly reviewing previously learnt material is how you will best memorise it.

6.     Now repeat the process and at the end of each Study Session, review the Study Session “-2”. In other words, after finishing Study Session 4, review Study Session 2. After finishing Study Session 5, review Study Session 3, and so on. It should take about 160-180 hours to complete the first “reading-and-review” of the curriculum.

7.     Now that we are done with new information, we focus on review and practice. Read Schweser's Secret Sauce and focus on the big picture. At the same time, keep practising with Q-Bank questions.

8.    Attend Schweser's 3-day online Review Workshop and write down useful tips as footnotes in Secret Sauce. Practice questions are included in the workshop. If you are short on time, this item of the list is the one to skip.

9.     Review all Readings in detail and, while doing so, (a) make a list of formulas, (b) make a key-concept list (To do so, use flashcards or an equivalent. “Do-it-yourself flashcards” work best. I would not recommend Schweser’s flashcards because they provide way too much information), and (c) keep improving the Secret Sauce book by adding footnotes about topics that you find most challenging and that are not sufficiently covered in this book.

10. Solve Challenge Questions at the end of each Reading, as well as Concept Checkers that you marked.

11.  Review Secret Sauce, study your formula list by heart and keep solving practice questions on Q-Bank. Alternate between these three elements until you reach the end of Secret Sauce.

12. Review all missed questions on Q-Bank and take detailed notes on what you missed and why. Please, be precise regarding the type of questions you got wrong and why it is so (no general comments such as "pay more attention"). It will help you improve your score considerably.

13. During the last six weeks, do a total of 6 mock exams, in the following order (for level III, start with the PM part, as it is more straightforward than the AM part). Use the time in between mock exams to correct them and review the weak concepts.

• Six weekends before the exam: Schweser mock 1 PM
• Four weekends before the exam: Schweser mock 1 AM
• Three weekends before the exam: Schweser mock 2 PM
• Two weekends before the exam: Schweser mock 3 full
• Saturday before the exam: Schweser mock 2 AM
• Sunday before the exam: CFA mock full
• Tuesday before the exam: Schweser mock 4 full
• Thursday before the exam: Schweser mock 5 full

Do mock exams under conditions as close as possible to those of the real exam: wake up, eat, and test at the exact same time as on exam day, so that your body gets used to this rhythm. This piece of advice can make a big difference.

On the day before the exam, only review known concepts (previous mistakes, formulas, and concept list), do not do intensive sport, and do not study for more than 4 hours to give your brain a break.

As a final word, I would advise thinking about the big picture before starting this 20-week study marathon. If you want to maximise your probability of success, you will need to be emotionally stable during the entire learning period. You most likely have some unsolved issues in your life, be it with family, at work, or personally. Now is the time to decide which problem you will solve before you start learning and which ones you will leave for afterwards. If you want to stop smoking, lose weight or do anything life-changing, choose to do it either before you start studying or after the exam but not in between the two. Studying for advanced certifications is exhausting and will require all the strengths you can gather. Now is the time to make decisions.

All the best for the exam!