How to Do Topic-Wise Preparation for CFA Level 1 June 2012 Attempt

  • Corporate finance:
    Corporate finance in my opinion is one of the most scoring topics of the level one exam. You can expect between 5-10 percent of the questions being asked from this section. To start with corporate finance, you need to first understand time value of money from the quantitative section very well. If you haven't done that please go and finish that first and then come back to this section.

    Once you start, the initial 15-20 percent of curriculum would be pretty self incubating; you will be following it up from the quant section. However, after that you learn the important concept of weighted average cost, capital structure and valuation which are more hardcore corporate finance concepts. The topics of leverage and dividend, these were a part of level two curriculum earlier but since the last 2 exams these are now a part of level 1 corporate finance. Understand them well, questions are relatively straight forward. They are analytical as well as quantitative in nature. So if you know your concepts and methodology well it is very difficult to get them wrong.

  • Economics:
    Economics contradictory to the popular myth, in my opinion is the most interesting and one of the toughest topics in the curriculum. The level one curriculum attempts to start from the basics and wants to make you an economist in some right by the time you are through reading all sections of the curriculum. The entire gamut of economics from demand supply, micro economics to the fiscal monetary policy and macro economics is covered in the level one curriculum. So my advice would be – try and read through all the concepts and think about all the concepts as you see being applied in the real world. No harm in taking a video from a good prep provider or through other source to understand the concepts. It's got about 10 percent weight age on the exam. However there is one whole book dedicated to economics so you really need to think deep to understand these concepts well to be able to answer them right in the exam.
  • Ethics:
    Ethics is the weakest portion of the exam. Ethic is the only section of the CFA curriculum that remains constant throughout the 3 levels so you study the exact same things. Please don't have the misconceptions that you are a good person and you are an ethical person in life, so you will score well in the ethical section because you have to be ethical according to the ethical definitions of the CFA institute. Make sure that you don't take this section lightly. It's going to be very boring when you read it for the first time but reading and remembering the exact section is not going to help much. The only way to master the ethics section is to practice, practice and more practice. So in this case I am going to advice students to refer to a good question bank from a good prep provider and use it to the maximum.
  • Equity Investment:
    Equity investment is a scoring topic as everybody is interested in stock markets these days. It is an interesting topic as it tells you how to add value and how to decide which investment to go for and which one to avoid. For preparation, read your concepts first and practice as much as you can. It is a straight forward topic in my opinion and scoring as well. About a 10-15 percent of the questions come in the level one exam from this topic. So it can help you score if you understand this topic well.
  • Fixed Income securities:
    Again level one has a more basics aspects of fixed income securities. So the basics of co valuation, duration and sensitivities are going to be covered. A lot of terminologies about the fixed income markets will be there. It can be a bit painful but you have to take it none the less. It builds a strong foundation for level 2 and level 3 where it becomes greatly evolved over level one. So a lot of basics and a lot of technical jargons that the students would have to remember but valuations concepts may not be very difficult.
  • Derivatives:
    Derivatives again it is an introductory topic. If you are new to finance then you may find this topic to be very confusing. So make sure that you understand the concept very well. Certain derivations in the derivatives may seem to be occult when you are reading it for the first time so again refer to the videos from a good prep provider for this regard. Derivative is a weak section for a lot of students especially for the students who do not have an experience in finance. Go right from the basics, understand it step to step and take your time on this section and no need to hurry up.
  • Financial Reporting:
    Financial reporting is very important in level one exam. It can make the difference between passing and failing. If you are not good with derivatives or alternative investments you may still get away with it. But if you are not good with financial reporting and analysis and not good with ethics because these two sections are like make or break sections. So there is no running away from it. It's about a lot of accounting and understanding of how accounting is done by the global standards in today's world. Its not very difficult, students have a phobia sometimes. However once you start studying for it in the beginning you will realize that it is a scoring topic and it is pretty prescriptive in nature. Not difficult to master. Don't be hesitant and scared. There is no running away from this topic. You devote as much time as you can on this as it will make a difference between passing and failing.