The Bootstrapper's Guide to CFA

Some quotes in Finance

2009-12-21T20:55:00.000-08:00

-The point is, ladies and gentleman, that greed -- for lack of a better word -- is good.Greed is right.Greed works.Greed clarifies, cuts through, and captures the essence of the evolutionary spirit.Greed, in all of its forms -- greed for life, for money, for love, knowledge -- has marked the upward surge of mankind.

- Human nature changes very slowly over time, if at all. Therefore, history is relevant because human beings will react to similar circumstances in similar ways. The trick, however, is to find the relevant piece of history on which to draw parallels. In this sense, forecasting is an art, not a science.

-Fortune has something of the nature of a woman. If she is too intensely wooed, she commonly goes the further away.

Funny Quotes

-We have seen this movie before - We are gonna be OK. (On the current economic crisis)

-Like it or not Finance is an area of credentials.

-MBA- Master of Bullshitting and Asslicking

-About a top tier program - "I got a job in I Banking not because of the program but at the cost of it." ( stress on networking)

-Having a Master in Financial Economics means nothing just that you have to be a Master in Job hunting.

-Risk Management is like eating glass - you will bleed through your rectum.

-Ask five economists and you'll get five different answers (six if one went to Harvard).

-It's recession when you friend loses his job , its depression when you lose your job.

-Anybody who had any talent, left India long back.

-In India their is a certainty of mediocrity , in US there is an uncertainity of excellence (in the first job).

- While Applying for MBA : "Doing a CFA will not differentiate you, not doing it will."

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2009-12-16T01:27:00.000-08:00

Future Posts

2009-12-14T12:20:00.001-08:00

I would like to post on the following topics in future as the time permits.

Actuary versus CFA
Top Finance Centric MBAs
Top Masters in Financial Engineering
Top Masters in Finance
Exhaustive List of Masters in Finance
Some Less Known but good Masters in Finance
Finance -Areas and Skill Sets
Top Target Firms in Finance
Why Finance is good for Engineers/Science Graduates

CFA versus MBA

2009-12-14T12:13:00.000-08:00

The positives of doing an MBA

• An MBA is still exclusive: It works in its favour that the CFA has been devalued now that more and more people are taking it (including, allegedly, one child's violin teacher).

• The best i-banking and asset management jobs still go to graduates of the top 10 MBA schools.

• An MBA offers contacts and networking; a CFA offers all the networking opportunities of an after-work home study course.

• An MBA from a top 10 school is infinitely better than a CFA, but a CFA has the prestige of an MBA from a top 20 school.

• A good MBA is a bonus for career changers; a CFA is best for someone already in the industry.

• An MBA gives you a prestigious brand name to market yourself with.

The plus points of a CFA

• A CFA is more difficult than an MBA; it's also more relevant, and more comprehensive.

• A CFA teaches hard skills and tests you on them; by comparison, an MBA teaches soft skills.

• A CFA is an excellent route into asset management.

• A CFA is already mandatory for most senior equity analysts and is increasingly required for fixed income analysts.

• Each of the three CFA exams requires 250 hours of study in your own time. That shows true commitment.

• MBA courses offer an introduction to financial theory. The CFA provides the tools to develop creative solutions to complex financial problems – and a growing number of top MBA schools are including it in their curriculum.

Conclusion

It helps to have both – the MBA for strategy and networking and the CFA for financial analysis – but even then you won't be assured of career success (particularly if you plan to use the combination to get a leg-up out of the back office).

Time required to clear CFA Level 1

2009-08-29T16:26:00.000-07:00

Since I have cleared CFA Level 1, so I would be commenting on CFA Level 1 only.
Later on as I go on clearing further levels I would be posting my updates/comments. Presently I am a CFA Level 2, 2010 Candidate.

The answer really depends on background and work experience. A relevant backround and work experience can reduce the effort needed by half or even thrice.

a.) Your past education background - How many finance/economics related courses you have taken - from the topics - economics, financial accounting/financial statements, fixed income, derivatives,equity,corporate finance, quantitative methods,portfolio management and alternative investments.Anything remotely studied is a plus point as you know what to expect.This is the most important factor for CFA Level 1.For Level 2/Level 3 this becomes less important.

A business undergrad(Economics/Finance/Accounting/Business Administartion) will find himself familiar with all the topics

A typical engineering major find himself alien to all the topics except maybe Quantitative Methods.

An MBA will find himself aware with atleast 50% of the syllabus.

b.) Your work experience - Generally work experience is less of an advantage when compared with background as you tend to focus on one asset class or area. Still most companied provide with initial training and exposure to general terms eases a lot of pain.

c.) Ability to retain learnt stuff -This is important as there is a lot of material to remember in CFA , although its not rote memorization but having a recall capacity helps.This can be overcome if you keep 20% of time for revision during normal schedule.For example you began with the Topic 1. By the time you have covered 4-5 topics you will forget the 1 st one.Thus you can revise topic 1,2,3 and 4 when you have covered topic 4.

Conclusion -

1.) A person with zero background and irrelevant experience will need 6 months for clearing CFA L1.Example - A engineering undergrad working in engineering /IT.This means about 15 hours per week or 360-400 hours in 6 months.

2.) A person with business backround will require about 3-4 months or about 200-240 hours.Example - A Economics undergrad in the Final Year.

3.) A person having business background and couple of years of relevant experience will need around 2-3 months and aroun 150 -200 hours. Example - A Bachelors in Finance working in Equity Reasearch.

Stupid Reasons for pursing CFA

2009-08-29T16:22:00.000-07:00

Quick Money – Some CFA aspirants believe that clearing CFA L1 would place them in Top I Banks and they will make loads of money. Actually this was the scenario during the great boom of 2007.I hate to tell you there is no Santa Claus, such times are not coming back for the next few years. CFA is a long battle and if you are not ready to persist and give serious effort you better not bother.

Substitute of CAT (Indian MBA) – On the Mumbai Exam center of CFA L1 June 2009 exam, 7000 CFA L1 candidates appeared. Even for CFA L2 and CFA L3 the number is unwarranted. I cannot understand why so many people are appearing for this exam as there are much less number of investment management and other CFA job openings in India. Most of the candidates are not working in finance, have no plans of moving to US/UK, or getting a MBA. Basically they are hoping to replace an Indian MBA with CFA.I am sorry to say that the road ahead is not going to be pretty. You will really have to work your ass off networking, job hunting, even then there is no guarantee .The point that these people don’t understand is that there is huge information asymmetry, traditional bias and under the table reference that goes on in Indian financial institutions.

Information asymmetry - I mean they will not hire someone with solid UG degree, great analytical skills and ‘CFA L2 cleared in 1 year span’ for equity research position. They will rather hire a 3 rd tier MBA graduate because that’s what they have been doing over the years.

Traditional Bias – CFA is a US based certification and is a new happening in India. Thus people having CFA in leadership position are few and far between. Most of these people are CAs and they tend to hire CAs over engineering + CFA.

Under the table Reference – You will understand this if you tried to mail your CV on a company’s website. Actually the email ids are synonym for a trashcan. You will never even get a response. The hiring process is screwed to say the least.

To Impress your girlfriend/boyfriend/parents/peers – You will be surprised to know a serious number of people are pursuing this exam to appear smarter to their friends/relatives.Don’t do it because eiter you won’t have a girlfriend or you won't pass. There was a thread on one private CFA Forum - CFA Level 2 v/s Girlfriend.This is the price that you have to pay. CFA basically constitutes giving up 24 months of your life.

Right Reasons for pursuing CFA

2009-08-29T14:20:00.000-07:00

Career Enhancement – You are already working in a financial institution – namely commercial banks, investment banks, mutual funds, rating agencies etc. Your job description may be or may not be related to investments. I mean if you are in equity research department then you have all the reasons to pursue CFA. But in case you are far from investment decision making, say data analytics even then pursuing a CFA makes sense as you can move horizontally across domains within the firm. Some of these candidates already have a MBA/MS Finance.

Career Change – A good percentage of CFA candidates fall in this category. You are working totally far away from even the smell of finance and you wish to make an entry into the club. You are in IT, Operations, engineering etc. Basically you are stuck in a hole/dead end job. A bit of warning of most of you - CFA alone will not help you to move into the finance side. You will have to do a lot of networking. Few things that can make your transition easier are - having work experience which might be useful along with CFA Knowledge. For example you have Excel-VBA experience and banks need someone to do some excel plumbing in such a case having a CFA L1/L2 will make your entry more probable.

Profile Improvement - Some of us are in dead end jobs and also have experience that is not useful to banks. Such mortals have to get a post graduate degree like MBA/Masters in Finance/Masters in Financial Engineering to move into finance. CFA L1/L2/L3 will bolster your profile showing your interest in finance as well as ability to handle the academic rigour of a post graduate degree. This necessity of getting a degree may sound a bit pessimistic but can be a blessing in disguise. The reason being if you belong to the Excel VBA type mentioned above then you may get an instant boost in terms of higher salary but you would be far away from the real deal. Thus pursuing a higher degree solves the problem once for all. The candidates falling in this category ironically have the highest passing rate.

CAT Frustrated Aspirant – You are a CAT frustrated aspirant who thinks IIMs are not worth spending years solving Quant, DI and VA , at least not un till you are in a reasonable position in your career. A good analogy would be a PhD student who becomes so disillusioned by academics that he wants to try corporate even though he never thought about it in his earlier phase of his life. CAT is a common entrance exam that selects management students based on their ability to solve quickly QA, DI, VA problems.

How to prepare for CFA?

2009-08-28T13:27:00.001-07:00

How to prepare for CFA?

The answer always lies in the problem.

Why do people get fired? They are either incompetent or unbearable. The solution become competent (technical skill) and become personable.

Why do people gain weight?

They eat a lot and exercise a lot less. The solution eat less and workout more.

Why do people fail exams?

They don’t put sufficient effort or their effort is in the wrong direction. The solution sufficient amount of effort with correct preparation methods. Effort you have to put this blog can give you some direction

CFA exam - Getting Started

2009-08-25T14:19:00.000-07:00

I thought about doing it but found a web page that summarise the facts in a concise way that I could possibly have done.

http://www.schweser.com/cfa/about/

I think the above page is a very good starting point

Another extremely good link is

http://www.stalla.com/cfaprogram/pdf_list.cfm

Spend sometime on these two websites and you won't be disappointed. I am neither supporting no disapproving these two study material providers. Just that the key points of exam are given in a concise manner.

And of course CFA Institute official link

https://www.cfainstitute.org/cfaprog/

What is CFA ?

2009-08-23T13:17:00.000-07:00

CFA is the most respected designation among the finance professionals. There are several other credentials but CFA stands out none the less. As per 'The Economist' the CFA Program is the gold standard among investment analysis designations.

In layman terms CFA is something that certifies that you know a bit of finance :).Some people on Wall Street say it’s a street degree signifying your hunger to learn finance.

In general, the CFA has a better reputation that an average Finance MBA (unless the Finance MBA is from a globally prestigious school).

CFA in India

However the above fact that CFA is better than finance MBA is not true for India where CFA still has to be fully accepted as an equivalent of MBA. It seems that financial institutions still follow the traditional pattern of hiring CAs (chartered accountants) for all sorts of finance roles. Another important point is the fact that 5-7 years ago CFA wasn’t as popular as it is today. This means a scarity of CFAs in leadership position in all financial institution . The conclusion is that not many managers are truly aware of CFA. The other side of the coin is that there are firms like Nomura, Detusche Bank and other Investment Banks that do hire CFAs and pay them hefty salaries.

Why a blog for CFA ?

2009-08-23T13:00:00.000-07:00

When I started preparing for CFA, I was looking for some guidance and information about this exam, the CFA designation and its utility in pursuing a finance career. All I got were some vague notions and half cooked truths. I gave my CFA L1 exam in June 2009 and cleared it. After going through this arduous process I decided to start a blog on this topic so that people could make some informed decisions regarding pursuing CFA. 80% of people don’t clear all three levels of CFA after 5 years from enrolling in CFA L1. Needless to say a lot of people waste a lot of their time and money on it. I just want to give you a feel of the overall process so as to aid in your decisions. My other objective is to clear the misconceptions and unwanted hype surrounded around this exam (especially in India).This blog will also contain my views on MBA, Masters in Finance and Masters in Financial Engineering programs. In nutshell it is a career guide for a newbie in finance.