| Saturday, November 18, 2006 |
| Do you need the Chartered Financial Analyst (CFA) certification to become a better investor? |
Was talking to a coworker yesterday who was thinking of taking the CFA exam and wanted to get my opinion. He does not work in securities industry and was thinking that taking the CFA exam would require prepping for it and that would help him become a better investor. As many people are interested in it, I decided to post some information about it on this site.
The CFA exam consists of three levels (Level 1, Level 2 and Level 3) or series of exams, with candidates allowed to take one level every year. If you pass, you can take the next level in the following year. The exam is extremely rigorous and tests on the fundamentals of investment principles.
As per the CFA's web site, some of the areas on which the exam tests you include: Business Strategy, Corporate Finance, Debt Investments, Derivative Instruments, Economics, Equity Investments, Financial Markets, Financial Statement Analysis, etc.
I was fortunate to learn about CFA from my professor-cum-advisor who happened to be a CFA. However, as I gathered more information on it, I realized that it would not help me much professionally as I did not want to work on the Wall Street or for that matter, in the securities valuation/analysis area. However, this certification can be helpful if some one wants to work as a securities analyst etc. As per the CFA's web site, based on a salary survey, they found that people with CFA designation had compensation levels 54 percent higher than those without it ($180,000 vs. $116,850), with salaries also dependent on years of experience in many cases (For complete survey, click the following link:
Link to salary survey at CFA's web site
However, any one who is thinking of taking the exam needs to consider the following facts:
- The exam requires a lot of preparation as well as commitment. Even if some one wants to take all levels, basically he/she has to commit at least three years to it
- The exam is very expensive. As per the CFA's web site, the fee for each level ranges from $450 to $690 per depending on when you enroll. In addition, you have to pay about $400 one-time registration fee. So a person can end up spending close to $2,000 just in taking all three levels, and that is assuming, he/she passes each level on the first attempt
- In addition to the exam cost itself, other costs also need to taken into consideration including the review material (each level's study book can cost about $400), and the fact that once you do earn a CFA, you will have to pay annual fee to keep it current.
So personally, I feel that CFA is a good investment for people who do want to work in the securities analysis/valuation area and especially, if their employer is willing to reimburse them for the certification exam and other costs. However, if someone's considering CFA primarily to improve his knowledge to become a better investor, and he will not be working in the securities analysis field, I think it may be better to study on your own and improve one's knowledge. As many of the successful mutual fund managers have shown, people can become better investors without earning a CFA; nor does earning a CFA guarantee that you will consistenly beat the markets. Of course, you still need to spend time and effort in expanding your investment knowledge and expertise in order to become a better investor.
If planning to take the CFA exam, here are the links to some study guides and review books for the exam preparation: For subscription to the Chartered Financial Analyst magazine, see:
  Chartered Financial Analyst
To learn more about the CFA, visit CFA Institute's Web site by clicking the link below:
CFA Institute
For Part II of this post, click the link below:
Career Options for CFAs
If interested in learning about stock investing, some of the low-cost, excellent books on stocks investing include:
Fire Your Stock Analyst!
The Stock Market Course
Rule #1
The Intelligent Investor
Contrarian Investment Strategies in the Next Generation
The Little Book That Beats the Market
eLearners Discover® Business Miles Card – Book Anytime, Anywhere! Apply Now!
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posted by Ruby @ 8:28 AM   |
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| 4 Comments: |
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Am happy to say that this post was my first entry to the Carnival of Personal Finance. The was accepted in the Carnival of Personal Finance #76 hosted by My Financial Journey
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Great blog. You are welcome to visit my blog at http://destinationcfa.blogspot.com.
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The CFA is a fantastic program that will benefit anyone who works in any part of the finance profession. Its rigour and the demands it places on candidates to pass the program are unrivalled. If your serious about finance...enrol.
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I agree - CFA is a very rigourous and challenging certification that is earned over 3 years. However, it's worth it, especially if some one is interested in working as a securities analyst.
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Am happy to say that this post was my first entry to the Carnival of Personal Finance. The was accepted in the Carnival of Personal Finance #76 hosted by My Financial Journey