All You Need To Know About CFA Level 1 – Syllabus, Important Topics, Weightage and Time Management

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.

Subject Weight Questions
Ethics 15% 36
Quantitative Methods 10% 24
Economics 10% 24
Financial Reporting and Analysis 15% 36
Corporate Finance 10% 24
Portfolio Management 6% 14
Equity Investments 11% 26
Fixed Income Investments 11% 26
Derivative Investments 6% 14
Alternative Investments 6% 14

**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
Topic Reading Reading Name
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
Topic Reading Reading Name
Quantitative Methods 6 The Time Value of Money
7 Discounted Cash Flow Applications
8 Statistical Concepts and Market Returns
9 Probability Concepts
10 Common Probability Distributions
11 Sampling and Estimation
12 Hypothesis Testing
13 Technical Analysis

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
Topic Reading Reading Name
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
27 Inventories
28 Long-Lived Assets
29 Income Taxes
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
Topic Reading Reading Name
Corporate Finance 33 Corporate Governance and ESG: An Introduction
34 Capital Budgeting
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 
Topic Reading Reading Name
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
Topic Reading Reading Name
Equity Investments 44 Market Organization and Structure
45 Security Market Indices
46 Market Efficiency
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
Topic Reading Reading Name
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
Topic Reading Reading Name
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
Topic Reading Reading Name
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.

Conclusion

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.

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