The Chartered Financial Analyst is a designation that speaks volumes for it is a distinctive credential that garners respect, hefty salaries, and experience for investment professionals. It known worldwide that clearing the CFA exams is no child’s play, it requires complete dedication as the test does not only test the text knowledge but also assesses the perseverance, diligence, and willpower of the candidate.
The current program under the CFA level 1 course is designed for self-study and distance learning to finally appear for an online exam. The CFA program consists of three levels: Cfa level 1, CFA level II, and CFA level III. The candidates appearing for the exams have to clear all the levels and must adhere to certain work requirements as posed by the CFA Institute. The curriculum for each level is different and is designed to test a wide range of skills that are relevant for investment professionals.
The CFA program remains updated with time and focuses on the knowledge that evolves with the needs of the industry, and is relevant and rigorous. The CFA institute identifies the industry trends and prepares the curriculum in a way that requires comprehensive knowledge, contemporary industry practices, and real-world application to be relevant to the program.
The Exam Curriculum:
The CFA exam concentrates on the basic knowledge and understanding of the concepts and tools important for investment valuation and portfolio management. The CFA program curriculum covers 10 topic areas that have different weightage in the exam. Here we will discuss CFA level 1 topics and their weightage.
● Ethics and Professional Standards
This section comes with a weightage of 15% to 20% and has about 27 to 36 questions to attempt. The section covers the code of ethics, professional standards, and Global Investment Performance Standards (GIPS). Preparing this section well in level 1 can be advantageous for levels II and III preparations.
● Quantitative Methods
The quantitative methods section explores concepts and techniques required for financial analysis and investment decision-making. This section considers both statistics and probability theory in calibrating the risk for investment decision-making.
Cfa level 1 economics tests the knowledge of basic micro and macroeconomic concepts. The candidates introduced to the supply and demand analysis of individual consumers and firms. And the various market structure to analyze the economic growth structures.
● Financial Statement Analysis
This section has a weightage of 13% to 17% and deals with financial reporting procedures and the standards of financial reporting disclosures. In the exam, the candidates are asked to analyze and interpret financial statements, revenue recognition, taxes, etc.
● Corporate Issuers
This section introduces the candidates to corporate governance and stakeholder management about investment and financial decisions. The section also highlights the impacts of environmental and social considerations while investing.
● Equity Investments
This section weighs around 10% to 12% of the questions and deals with equity investments, security markets. And indexes and analyzes the basic equity valuation models. The questions are based on valuing and analyzing companies.
● Fixed Income
This section deals with calculating the values of fixed-income securities, measuring yields, securitizing the assets, principles of credit analysis, and the fundamentals of bond returns and risks. The candidates require to know the characteristics of various fixed-income securities and their pricing.
The Derivatives section introduced only in CFA level 1 derivatives and candidates tested based on futures, forwards, swaps, hedging, and options techniques using the derivates. The program helps in building the conceptual framework to understand the derivatives market.
● Alternative Investments
This section explores alternative investments like private equity, hedge, commodities, real estate, and infrastructure. Alternative Investments level 1 only introduces the topic and in-depth knowledge is offered in levels II and III.
● Portfolio Management and Wealth Planning
This section only introduced in level 1 and deals with the fundamentals of portfolio and risk management along with portfolio planning and construction and risk and return management. To identify the optimal risk in portfolios the capital asset pricing model used.
The Final Word:
The CFA level 1 course structured to equip the candidate with the expertise and skills required for investment analysis. The exam tests the fundamentals of investing tools, portfolio management, wealth planning, and valuing assets. By completing the CFA program, the candidate can earn the right to use the designation of “Chartered Financial Analyst”. And will be qualified to work in executive positions in investment analysis and management.
However, the most important step in clearing the levels is preparation. Many such institutes developed to help with the preparation of Chartered Financial Analyst exams or particular subjects such as CFA level 1 derivatives, etc. Since it is a globally recognized credential in the investment management industry. It ensures that a CFA charter holder has the knowledge and commitment to deal with the complexities of contemporary investments. Moreover, the structurally designed and industrially relevant curriculum prepares the CFA charter for the challenges of the investment market.