Weight age of each subject –
The exam consists of two sets morning and afternoon and each set has a set of 120 questions. Ethics and Financial reporting and analysis have a maximum weighting.
|Financial Reporting and Analysis||15%||36|
|Fixed Income Investments||11%||26|
**Note – The number of questions may differ on the exam however, even if the weights change the complexity will remain the same.
CFA Syllabus – Time Management and Topics to Focus
Now that we have covered the weights let us jump into the scope of the syllabus, difficulty level and the areas of focus.
- Ethical and Professional Standards
|Ethical and Professional Standards||1||Ethics and Trust in the Investment Profession|
|2||Ethics code & Standards|
|3||Guidance for Standards I–VII|
|4||Introduction to Global Investment Performance Standards|
|5||The GIPS Standards|
This subject is aimed to promote professional ethics and has a significant weight age in the exam. About 36 of the total questions out of the total 240 are based on this module.
Even though this subject has the highest weighing it is common that students start studying for it one week before the exams or read at the beginning of the preparation and then revise it a day before the exam. This is because ethics mainly covers standards that you are expected to remember. If you study ethics months before the exams without revising there is a high chance that you will not be able to recall them. Regardless of which strategy you use the end goal is to remember the standards and principals in the exam, so pick what best suits you.
- Quantitative methods
|Quantitative Methods||6||The Time Value of Money|
|7||Discounted Cash Flow Applications|
|8||Statistical Concepts and Market Returns|
|10||Common Probability Distributions|
|11||Sampling and Estimation|
This module is maths oriented and the main areas of this module are statistics, hypothesis testing, probability, time value of money. This module helps you in being efficient with the calculator and formulas. Please note that a few readings from this module are also covered in other modules. So the expert you are in Quant the better you will be in other subjects.
I would recommend you to focus on this area and begin with this subject first (second if you are planning to go for ethics first). Even though it has 10% weight age in Level 1 this module repeats in Level 2 and Level 3 and goes on being quite complex so it is important to get the basics right.
- Financial Reporting and Analysis
|Financial Reporting and Analysis||21||Financial Statement Analysis: An Introduction|
|22||Financial Reporting Standards|
|23||Understanding Income Statements|
|24||Understanding Balance Sheets|
|25||Understanding Cash Flow Statements|
|26||Financial Analysis Techniques|
|30||Non-Current (Long-Term) Liabilities|
|31||Financial Reporting Quality|
|32||Financial Statement Analysis: Applications|
Financial Reporting and Analysis (FRA) is super important! And 36 of the 240 questions are based on FRA. As you can see from the weights above no other subject apart from ethics is tested so meticulously and is considered to be one of the toughest subjects in the syllabus.
In Level 1 you will come across a lot of terminologies that will also be required at other levels. This module helps you in developing all the skills required for analysis and reporting the financial statements.
Tip – You should spend around 35% to 45% of your time on these three topics.
- Corporate Finance
|Corporate Finance||33||Corporate Governance and ESG: An Introduction|
|35||Cost of Capital|
|36||Measures of Leverage|
|37||Working Capital Management|
Corporate Finance is one of the easiest topics of the Level one exam this is because this subject is very logical and intuitive and the formulas are easy. The scope is also quite limited and includes concepts related to NPV, IRR, corporate governance and capital management.
- Portfolio Management
|Portfolio Management||38||Portfolio Management: An Overview|
|39/40||Portfolio Risk and Return: Part I and II|
|41||Basics of Portfolio Planning and Construction|
|42||Risk Management: An Introduction|
|43||FinTech in Investment Management|
As discussed earlier, Portfolio management and Quantitative methods are inter-related and if you have studied Quant module before starting this module then understanding Portfolio management will be a cakewalk. This module is a mix of theory and quantitative topics. Only 15 of the total questions are based on this module.
- Equity Investments
|Equity Investments||44||Market Organization and Structure|
|45||Security Market Indices|
|47||Overview of Equity Securities|
|48||Introduction to Industry and Company Analysis|
|49||Equity Valuation: Concepts and Basic Tools|
There are a lot of CFA candidates who are already investing and trading and to do this as they follow companies listed publically. Having practical experience makes understanding this module very smooth. Please note that this module is very theoretical and tests your memory skills. For candidates who have not made any investments or lack practical experience need not feel unconfident, you can still learn this subject if you have a good memory.
Tip – The above three topics are considered to be the easiest module of the Level one exam and you should spend about 15% to 20% of your time on them.
- Fixed Income
|Fixed Income||50||Fixed-Income Securities: Defining Elements|
|51||Fixed-Income Markets: Issuance, Trading, and Funding|
|52||Introduction to Fixed-IncomeValuation|
|53||Introduction to Asset-Backed Securities|
|54||Understanding Fixed-Income Risk and Return|
|55||Fundamentals of Credit Analysis|
Fixed Income is considered to be the toughest module after FRA. ~26 questions on a fixed income are tested in the exam making it an important module. However, fixed income has the toughest theory as well as the toughest maths and this module could be a challenge if you have never dealt with the bond market. This module covers bonds valuation, analysis, and risks related to investing in debt securities.
|Derivatives||56||Derivative Markets and Instruments|
|57||Basics of Derivative Pricing and Valuation|
Is it possible that a module with such a low rating can be considered as the third toughest subject of the Level 1 exam? Well, yes and that’s the case for Derivatives with many of the students. The derivatives that this module covers are forwards, futures, swaps, and options. It is challenging to conceptualize how these derivatives work.
However, if you feel that this module is consuming a lot of time without any output than keeping it on hold is a sensible option. Keep in mind that your result is not based solely on this subject and has very little weight.
- Alternative Investments
|Alternative Investments||58||Introduction to Alternative Investments|
This section covers all the forms of investment not covered in the other modules. Questions are mainly conceptual; this section has a small weight age and can easily be mastered with reasonable efforts.
Tip – You should focus on spending about 30% – 35% of your time on the above four modules.
I understand that this must be too much information! But these are the crucial things you should know before you start studying for level one. By now you must have understood the scope of the modules, weight age, complexity level and areas of primary focus. Clearing CFA level one opens up a lot of opportunities and increases knowledge for every financial aspirant. Every student must set their focus on the CFA charter and put in 100% effort.