Devoted to understanding the basics and fundamentals of investing

Dan asks for advice on the best way to study the topics for the CFA Exams.  He learns best through real life applications.

Dan, I hope you do decide to pursue the CFA designation.  It will serve you well in dealing with investors and hopefully clients for your fund.  If you obtain the credential, all 50 states will exempt you from taking the NASDQ investment series exams, which is a nice bonus.

In order to obtain the Chartered Financial Analyst designation, you must pass three exams.  You must also have three to four years of experience in the industry.  The exams are not easy.  The pass rate for the December 2005 Level One exam was 34%.  That was the highest level in three years.  Levels Two and Three pass rates hover around 50% pass rates.  50% of 50% of 34% is 8.5% cumulative pass rate for the three exams.

The Level One exam is all multiple choice.  This allows them to test subtle nuances in the answers.  They recommend at least 200 hours of study, I find most people that pass are closer to 300 hours.  That is my first recommendation, study hard.

You should remember that every test reflects the biases of the tester.  This is true of the CFA Institute as well.  You will need to learn their perspective on ethics and investing.  This may or may not align with your experience in the world.  What it means, is that you have to read their material - the body of knowledge.  You have to learn the learning objective comments for each sub-category.

In my experience, you will benefit from taking a review course or using the notes from a review course provider.  The Financial Analyst Review and Schweser are two groups I have experience with that are excellent.  The review courses give you perspective on what the CFA Institute feels is important and insights on how to study for the exam productively.  That is my second recommendation, sign up for a review course.

There are practice exams available on line and for purchase from various sources.  Take as many of these as you can find.  Each exam takes six hours and you have about 90 seconds to answer each question.  Taking the exams gets you used to the questions and the pace of the test.  That is my third recommendation.  Take as many tests as you can find.  The CFA Society of LA has a practice exam and a review course available on line or near where you live.  They may be able to help you.

So Dan, GOOD LUCK!!  It's a worth while endeavor.  I hope you choose to do it.

I wrote on investing in yourself last Friday.  I wrote an article titled CFA - Worth The Effort which has generated more comments than any other post I have made.  An anonymous commentator wrote that as an active trader of his own portfolio the only thing his bankers cared about was success.  A CFA or MBA were superfluous.

My friend Bob H wrote a masterful response that is worth reading.  Thanks Bob.  I would like to use my bully pulpit to put two more of my cents into the equation. 

I traded FX for 5 1/2 years in 132 currencies in 169 countries.  I traded for Tom, Spot, and Forward settlement.  I traded range forwards, caps, collars and floors.  I traded digital or one touch options.  I was generally very successful.  I mention this only to say that I understand trading and a trading mentality.

What prepared me to trade FX?