Are you taking the CFA exam this year? Then you need to have a clear understanding of the topics. Joining CFA level 1 classes is the best way to further your preparation as the faculty would guide you every step of the way. Level 1 is the first and possibly the toughest stage of the exam and you need to prepare accordingly. The curriculum is endless and a lot of things have to be squeezed in a short period to cover everything. Only when you do a thorough analysis of the topics, you’ll know the right way to plan your schedule. A detailed overview of the topics involved along with the weightage assigned to each topic can be of immense help to you in your CFA journey. You can assess which topics need more attention and which ones need a cursory glance.
Here is a detailed presentation of the topics which you need to familiarise yourself with comprehensively.
CFA level 1 topics: In-depth overview
- Ethical and Professional Standards: The weightage assigned to the Ethical and Professional Standards topic is 15-20% in the level 1 exam. You can expect anywhere between 27-36 questions from this topic.
Why do candidates have to learn about ethical and professional standards?
There are a lot of finance gurus out there who have duped unsuspecting investors with their unscrupulous advice. It is thus necessary to inculcate ethical practices in the profession right from the beginning. Integrity, competence, prudence, and respect are the pillars on which the investment profession stands and the client’s interests are above everything else. Candidates have to learn about the Code of Ethics and Standards of Professional Conduct and the Global Investment Performance Standards (GIPS) for CFA level 1.
- Quantitative Methods: The weightage assigned to this topic is 8-12%, which means you can get approximately 14-22 questions in the exam. Don’t be fooled by the low weightage as there is considerable overlap between quantitative methods and other topics.
Why do candidates have to learn about Quantitative Methods?
Investing is a probability game and therefore, candidates need to be well-versed in the subject. Determining the time value of money to assess the value of securities is necessary to predict the right outcome. Having a basic understanding of probability concepts is important to make the right conclusions.
- Economics: Like Quantitative Methods, the weightage of economics is also 8-12% and you can get somewhere between 14-22 questions in the exam.
Why do candidates have to learn about economics?
Economics is the orbit around which the world of business and investment revolves. Without understanding macro and micro-economic concepts and trends, it is difficult to make a sound assessment of the market. It is important to study how geopolitics affects global markets to have a clear idea of global investment patterns.
- Financial Statement Analysis: This topic has a good weightage of 13-17% (13-17%), which means you can expect about 23-31 questions in the exam. It is considered the Achilles’ heel of the CFA exam due to the sheer number of formulae and numerical problems in the topic.
Why do candidates have to learn about financial statement analysis?
Dealing with financial statements like balance sheets, inventories, income statements, cash flow statements, assets, and liabilities, is the daily bread and butter of a portfolio manager. Candidates need to have a thorough understanding of the topic as this would form the core of their financial career. CFA Level 1 has a basic introduction to the topic which is continued further in level 2 and 3 exams.
- Corporate Issuers: The Corporate Issuers topic has a weightage of 8-12% in the level 1 exam so you could expect about 14-22 questions from this topic.
Why do candidates have to learn about Corporate Issuers?
It is crucial to understand the corporate governance structure in order to get a formative idea of how firms execute decisions in the capital market. Candidates should be able to answer questions on business models and the associated risks. How firms manage their working capital and how they utilize their capital assets are important aspects of the Corporate Issuers topic.
- Portfolio Management: Portfolio Management and Wealth Planning have a weightage of 5-8% in the level 1 exam. Which means you’ll get approximately 9-15 questions.
Why do candidates have to learn about Portfolio Management?
Most CFA aspirants harbor dreams of becoming portfolio managers one day and therefore having a working knowledge of portfolio management is important. Candidates should know how mutual funds and pension plans are managed and how a portfolio investment is done in general. They should also know about the portfolio risks and returns and how these metrics are calculated.
- Equity Investments: Equity Investments have a weightage of 10%-12% in the level 1 exam. Approximately 18-22 questions are asked in the exam.
Why do candidates have to learn about Equity Investments?
This is one of the most important topics of the CFA level 1 exam. The worth of an investment manager is assessed by the returns he has generated for his clients, especially in the equity market. Investing in the right stocks is a crucial skill every CFA must know and therefore, having a sound knowledge of the equity markets is a must.
- Fixed Income: The weightage assigned to the Fixed Income topic is 10-12%. You would see around 18-22 questions from this topic in the level 1 exam.
Why do candidates have to learn about Fixed Income?
Fixed income instruments such as bonds and Treasury bills are a good way to secure decent returns for clients and are an essential part of the job profile of a CFA. The candidates should have knowledge about the features of different fixed-income instruments and how interest rates are affected by market forces.
The other two topics are Derivatives and Alternative Investments both of which have an equal weightage of 5-8%. You can expect approximately 9-15 questions from these two topics. The Derivatives topic includes concepts like Futures and Options while the Alternative Investments topic includes alternate investment routes like real estate, commodities, natural resources, and hedge funds.
Conclusion
If you want to clear the level 1 exam of CFA, it is important to know the curriculum in detail. This helps you prepare an effective strategy that could be the ultimate clincher for your career in finance. Joining good CFA level 1 classes is a good way to start your CFA prep as the experienced faculty would cover every aspect of the curriculum elaborately.
