Why most people fail the CFA® exam? The top 5 mistakes you must avoid.
1. Not enough studying
Many candidates significantly underestimate the time requirement to ensure success on the exam date. It is commonly agreed that in order to pass any level of the CFA® program, a candidate must invest between 300 and 350 hours. This might seem a lot to many people, but in reality, the required hours increase for each level.
Candidates often make the mistake of either starting to study too late and them rush to catch up and cram all the required materials for the exam date. While this strategy might work for some, in general, this will not work for most people. In addition, if you only study intensely for the exam, you will likely forget most of the concepts few months after the exam date. This will also make it harder to study for the next level, since you will need to memorize everything again instead of developing the ability to make links between the concepts and understand the relationships on a much higher level.
Another mistake related to the time requirement is when candidates start to study too early. While you might think that by starting to study 8 months before the exam date you will be able to know more and learn better, the reality is that you will most likely start to procrastinate and study very little each time without remembering much.
To adequately prepare yourself for the exam, we suggest you begin studying at the beginning of February (or in August if you are writing the December exam). You should aim to study between 1 and 2 hours per day on week days and between 8 to 10 hours on the weekends. During your first reading, your goal should be to get the gist of the material without spending too much time on each topic or wasting too much time on concepts you do not understand. It is critical that you do the practice questions at the end of each Study Session. Mark all the answers that you get wrong in order to come back to them after.
By mid March (or mid September), once you complete the first reading, you should attempt to do 2 or 3 practice exams. These exams will really indicate your strengths and weaknesses and outline where you need to focus your attention.
Then you should reread everything once more and redo all the practice questions. This time, you need to make sure to really understand the topics and spend more time on strengthening your weak spots for the exam. By the mid May (or mid November), you should be done with all the questions and all the readings. We recommend you invest the remaining days before the exam to strengthen your Ethics concepts and do more practice exams in order to solidify any topics where you still have difficulties.
2. Focus on the wrong things
A common reason why many candidates fail their CFA® exams is because they spend too much time on the wrong things. This is especially common for first time exam takers. They tend to read everything and avoid moving to other topics before they’ve understood all the concepts. Although it might seem right to make sure to really understand everything before moving on, it is important to understand that different topics cary different weights on the actual exam. In addition, some study materials will not even be on the exam.
For example, Portfolio management carries less than 5% weight on the CFA® Level 1 but it carries between 45% and 55% weight on the CFA® Level 3.
Since your study time is limited, it is important that you manage your efforts accordingly.
3. Not solving enough problems
Many candidates underestimate the necessity to do a lot of problems before the exam date. Each level on the CFA exam is very complex and has a tremendous amount of information. If you only concentrate on reading the books without doing a lot of practice problems, you will most likely fail on the exam. The best way to remember and really understand the material is to practice applying it. Practice exams and problems sets are the best way to not only spot your weaknesses but also to practice answering many questions in a very short time period.
For CFA® Level 1, you have to do 120 questions in the morning and 120 questions in the after noon. Each session lasts 3 hours or 180 minutes. This comes to about 1.5 minutes per question. If you are not comfortable with specific topics, you will most likely end up spending too much time on them instead of moving on and succeeding on topics you are most comfortable with.
It is crucial to develop an instinct to problem solving on the CFA® exams. You can only develop this capacity by doing a lot of practice problems and learning from your mistakes.
It is also important to understand that it is not the quantity of hours that will give you an edge on the exam day, but the quality of your studies. How you study is more important than how much you study.
4. Memorization vs. Understanding
The CFA® study sessions are a wealth of knowledge. At first is can seem overwhelming and you can think that you need to memorize everything to be able to recall it on the exam date.
From our own experience writing the exams and assisting other candidates to prepare for theirs, we found that it is more important to understand how the concepts are applied than to memorize everything as presented in the books.
You are studying for the CFA® exams because you want to be able to apply your knowledge to real world applications and problems. While it is important to memorize specific ratios or formulas, you need to realize that in the real financial world, all the ratios and formulas can are easily available for free from most financial data providers such as Bloomberg, Yahoo Finance, Reuters, etc. Your role as an analyst is to be able to make links, make deductions from your analysis and make predictions on where you think the markets and the securities are going.
For these reasons, we recommend avoid intense memorization and instead really understanding the concepts. In addition, the materials you learn on the CFA® Level 1 also come up again on CFA® Level 2 and CFA® Level 3 but under different scenarios and in different context.
If you have trouble grasping the essential of the CFA® Level 1 exam, we recommend you check out our CFA Level 1 Hacks. We created this eBook specifically to give you not only a valuable summary of the essentials, but also to provide you with practical ways how you can use and apply the study material in real life.
5. Thinking you will fail
The state of your mental awareness is probably the most important factor what will greatly influence how you perform on the exam day. In one of our previous post Occult Stratagems to Plan Your CFA Success we talk about how to adequately prepare yourself for the exam day and get your game on before entering the exam room. What we want to stress in this article is the way you think about yourself and your preparation affect 100% your performance on the exam day. Many candidates fail because they think they they are not smart enough to pass the exam or because they failed something in the past, they will ultimately fail the CFA exam as well.
However, nothing can be further from the truth. If you make sure to invest your time wisely, understand the fundamentals behind each study session, and you make sure to do enough practice questions and solve enough practice exams, understand how to use your financial calculator either the Texas Instruments BA II Plus or Hewlett Packard 12C to short cut many calculation and avoid calculation error, you are certain to be more prepared than you think.