10. CFA Preparation

CFA PREPARATION

Jay Masalawala MBA06 IIM Amritsar

CFA level 1 Cleared

I have been really interested in equities investing and trading since the last year of my engineering. I opted to do the CFA Course in order to have a better understanding and more extensive knowledge about the financial markets. After completing a year at a prestigious institute, I knew I would face challenges juggling ten subjects along with a rigorous MBA curriculum. Because it takes around 300 hours to study for the CFA Level 1 Exam and I started preparation in the month of April, I chose November as the best month for scheduling my exam. Here is how I prepared for my CFA Level 1 Exam. The first is Schweser's notes. They were really useful since they were much more concise and straightforward than CFA textbooks. Do not fall into the trap of referring to too many materials. I went back over the notes three times and completed all of the practice questions at the end of each topic. Because I wasn't familiar with the material, it took me the longest (around three months) to get through the first time. But it became faster the second and third times.

I am from an engineering background; hence, I know I have to give extra time and effort, especially to subjects like Financial Reporting and Analysis and Economics. Reading topics like Corporate Finance, Derivatives, Equity Investments was never a challenge to me because of my interests. However, Fixed Income Securities and Ethics are not difficult but bit tricky subjects. Ethics has significant weightage in the CFA Level 1 exam, so a low score in this subject would significantly impact your score. Practicing ethics questions from the book 'Ethics in practice' would have an additional advantage. The second category includes all of the multiple-choice practice questions included in CFA textbooks. The majority of these questions are extremely close to those on the actual exam. I went through all of the questions multiple times, so when I took the actual exam, everything felt quite familiar to me. Talking about the CFA L1 exam pattern, it is not a speed-based test like CAT. It tests your understanding, and sometimes spending time on questions is more beneficial than directly jumping on to answers to save time. Also, CFA L1 tests more concept-based questions than real-world calculations, so don't squander the last few days of your study time on lengthy calculation-intensive problems. The third point to mention is the mock tests supplied by CFA to candidates. A month before my actual CFA exam, I took the simulated examinations to gauge my readiness. Mock examinations, in my opinion, are more complicated than genuine exams. I also practiced all the practice tests from Schweser's notes. Practicing test and analyzing it is more time-consuming and exhausting, but it will prepare you for the D Day as there would be only one optional break between the exam. Getting used to exam patterns is essential because the second session can be challenging. Examine the curriculum and depth of each subject, and carefully plan out your study schedule. It is preferable to get a financial calculator at the start of the preparation process in order to become acquainted with it. Learn as many functions as you can because just a handful of them are effective in solving complex Fixed Income Security questions. My summer internship was initially begun in offline mode, but after a couple of weeks, it converted into an online mode, allowing me to devote a significant time to

CFA PREPARATION

prepare for the next 40-50 days. A head start in the beginning has significantly helped in my preparation. I have dedicated a whole day for the preparation in the last month before the exam. Schweser's Secret Sauce is beneficial in the last month of preparation because it almost summarises every topic of the curriculum. It would Be ok to leave one or two really tough topics with lower weightage rather than wasting time on them and failing to revise commonly questioned topics during the final days of preparation. This phase is critical since most subjects must be reviewed, which considerably improves exam performance. During the critical phase I devoted most of my time revising important concepts and giving analyzing the mock test. Mistakes in the mock test and learning from those mistakes have significantly helped me in improving my exam performance. Finally, I'd like to highlight that you shouldn't be concerned about CFA examinations; most ideas are already taught in MBA curriculum; you simply need to brush up on certain of them depending on the test format and your current level of preparation.

CFA PREPARATION

Siddharth Sarma MBA07 IIM Amritsar

CFA level 2 Cleared

Until a few years ago, I was a bright-eyed engineering graduate with a knack for number crunching. Indulging in the CFA curriculum opened a Pandora's box of knowledge and a window into the world of finance where I could use my quantitative abilities and critical thinking to good use. Now, having gone through the rigors of the CFA exams twice, there are a lot of things I wish I knew before registering for the CFA Program. The article aims at providing a comprehensive guide for all CFA Program candidates and potential applicants, taking the reader through the journey of a CFA Exam.

Pre-Requisites

Once a potential candidate meets the basic eligibility requirements, they can register for the CFA Program and enroll for the Level 1 Exam. The CFA Institute provides a downloadable version of their curriculum for registered candidates. Although the CFA Exams were branded as the world’s hardest exams by Financial Times, the bar is pretty low with regards to prerequisites for the Level 1 Exam. Candidates just need the knowledge of basic math, one of the two recommended calculators and a willingness to learn. An understanding of capital markets would help candidates relate better to the concepts in the curriculum. Better yet, relating the concepts learned to real-life examples would help cement the learnings. For example, after learning about private equity, candidates can check the recent activities of private equity firms in the country.

The Curriculum

The CFA Institute Candidate Resources includes the PDF version of the curriculum and the Learning Ecosystem, which is an online learning tool that consists of the curriculum, end of reading questions, mock-exams, flash-cards and much more. I would advice candidates to use these resources to good use. For example, the practice questions are a great way to get a feel for the exams and test exam readiness. Third party prep providers and study materials are available which are concise and save reading time as compared to the extensive CFA Institute curriculum.

Study Flow, how to prep

The CFA exams, for most parts, don’t check your speed, but conceptual understanding. Candidates are tested on concepts from every nook and cranny of the curriculum, (even the obscure niches). Hence, it is important to learn and understand (not mug up!) the entire expanse of the curriculum. The institute study material is vast and full of examples, but candidates can study through the much concise study materials provided by third party prep providers like Kaplan Schweser. Personally, I feel these study materials explain the whole curriculum in a simpler manner. Candidates can also purchase video lectures by authorized prep providers which save a lot of time in terms of understanding the concepts, but are not inexpensive. Regardless of the study method, it is paramount to solve the institute questions provided at the end of each reading or accessed through the practice questions in the learning eco-system. As they say, “Practice makes perfect.” I would recommend candidates to make notes of important points and formulae which would help in revision later. CFA Institute offers two mock exams. Mocks should be taken one month before the exams as it is a good tool to assess candidates’ exam preparedness and

CFA PREPARATION

gives time to brush up on long-visited concepts. There is an arbitrary consensus that it takes 300 hours of prep time to pass any CFA Exam. This includes studying readings, solving questions, countless revisions and mocks.

Hence…

Starting early is important

The CFA Exams are not easy and Level 1 is just the start. I have found that allocating roughly 300 study hours over six-month period gives optimum results. There is enough time to cover the entire curriculum and offers flexibility to shuffle around with study time. However, candidates must choose a timeline better suited to their study habits and work schedule. Note that consistency is the key and small consistent study hours are more impactful in learning than long infrequent ones. Weekends give a much-needed break from stressful workdays and are perfect time to study. Candidates might need to kiss their weekends goodbye! The CFA Program is very demanding and is a test of your commitment and determination more than anything else.

Staying motivated is the key

The curriculum for any level is very dry with a vast range of topics to cover. BURN-OUTS ARE PRETTY REAL!! Every candidate goes through periods of slump, when it is difficult to motivate oneself to study. On top of that, juggling work-life-study balance seems almost impossible. It is essential for candidates to plan for breaks in their schedule, when they can recharge their batteries. Starting early helps accommodate unplanned breaks. But most of the times, candidates will have to power through extended periods of slump, hoping to reach the gold at the end of the rainbow.

Pre-Exams

It’s the last week before the exam. You have done all you can so far. Now, it’s time to prepare your mindset to ace the exam. Focus on reviewing topics and formulae. Personal notes help a lot during these revisions. Conceptual understanding is prime but there will be concepts that you simply cannot master. Personally, that has been “Financial Reporting and Analysis” for me! So, if there is a time for mindless memorization, it is now. But don ’t overburden yourself. Pre-exam jitters are scarier than the actual exam itself! Relax. You’re smart. You’ve got this!

Exam experience

The CFA Exams are a nerve-wracking experience. The panic is visible in the waiting room where all the candidates are trying to mug up any and everything that they can get their hands on in the last moment. The proctors and security personnel add to the intimidating atmosphere. The good thing is that the candidates need to carry only their calculators and passport. The center provides paper, pen and water. Any and everything else is stored in the waiting area. After security check, a staff member would escort the candidate to his allotted computer. Since it is a computer-based exam, candidates can start as soon as they are allotted a computer. The timer is built in the test itself. Pro tip: Carry a sweater or hoodie. Most candidates complain about how cold the exam halls were. Note that there will be questions on the exam day that will stump you. The objective of the exam is not to get everything right but to get enough right. So if you stay calm, you can make educated guesses on those questions. The best thing about the exam day is that, when it’s finally done, you get your well deserved break!

Results

The exam results are announced 8-10 weeks after the exam window. The CFA Institute mails the result to the candidate directly. It is a graphical depiction of the performance of the candidate with respect to a

CFA PREPARATION

Minimum Passing Score. Results are pretty straightforward: If you’re above the Minimum Passing Score blue line, you pass. Well, it is so simplistic that it conveys almost no information other than pass, fail and 90th percentile. In a similar vein, the results for individual subjects are also provided. Candidates can judge how they performed in individual subjects to ascertain where they need to work on. Finally, the possibility of failing is very real. It might be disheartening, but it only means that you need to be more prepared the next time! To reiterate, the CFA Exams are a test of your commitment and determination more than anything else.

Scholarships

There is a considerable cost in pursuing the CFA Charter. Luckily, the CFA Institute offers varying scholarships to applicants which would reduce the registration and exam enrolment fees. Candidates are advised to check their eligibility and apply for scholarships before enrolling for any exam. All scholarships have varying windows and deadlines, so make sure you understand them before applying to stand a chance at receiving one. Finally, the CFA Program is a good signalling tool and quality indicator but it is not a wonder drug to cure all problems. It is powerful when combined with practical skills. Considering the time and effort sunk costs associated with taking the exams, it is important for candidates to assess whether this is what they want to do. About 1000+ hours of study time over four years on an average is definitely not for the faint hearted! Better realize it earlier than midway. For those, who have decided to pursue the charter, the road is full of bumps, but the goal is achievable, only if you put in the hours!

GOLDEN INVESTMENT FUND

The Finance and Economics Club, IIM Amritsar announced the launch of Golden Investment Fund (GIF), the student-run investment fund of IIM Amritsar, in February 2019. It was started with the aim to give hands-on experience to the students about investing and applying their research into the equity markets. Team GIF aims to create a culture of research, analysis, and investment among the members of FEC and Finance Enthusiasts of IIM Amritsar. The equity fund intends to achieve better risk-adjusted returns than its benchmark index through investment in large-cap, mid-cap, and small-cap stocks.

GIF team releases weekly company reports and monthly fact sheets of its portfolio under management. The monthly report provides an outlook of the current market scenario as well as the companies in the portfolio of the fund. GIF team analyses the company’s fundamental and competitive. position in the market, investment risk, growth prospects, and investment decisions.

CLUB ACTIVITIES

Since its inception in 2017, FEC has been one of the most important student interest groups of IIM Amritsar. To provide students, an enriching learning experience in the world of Finance, the club organizes numerous interactive events throughout the year. It supports students in their journey at IIM Amritsar, helping them harness their potential and enthusiasm and guiding them at every turn. From providing advice about additional certifications and online courses, like Bloomberg Market Certification, to helping them with subject choices and interview experiences, FEC facilitates outside-classroom training to upskill them leading to brighter career opportunities.

This year, with sessions being both online and offline has brought its own set of challenges but the impact was not high enough to mar the spirit of the club that conducted the following events: Golden Investment Fund (GIF): It is a student managed investment fund composed of experts in the field of F&O and intraday trading. GIF team releases weekly company reports and monthly fact sheets of its portfolio under management. Along with an overhaul of their reports, the GIF team also contributes to the IIM Amritsar’s culture by conducting knowledge sessions and investment lectures to engage peers and motivate students to invest in capital markets and develop financial acumen among students. Pariprekshya: From 2017, FEC, in collaboration with the Industry Interaction Cell, has been successfully organizing IIM Amritsar's maiden Finance and Marketing Conclave where eminent industry experts share their view and experience on the big stage in front of IIM Amritsar faculty & students. It has helped the students get relevant industry insights and get acquainted with the industry trends. The guest list included several industry stalwarts who helped us broaden the horizon of awareness. Starry Nights: FEC is known for its trademark "Starry Nights" sessions where members share their knowledge and experience in an informal setting. In Starry Nights an informal discussion takes place on particular topics in which every attending student can participate in the discussion sharing their point of view, hence contributing to a healthy discussion on important issues. Various Starry Nights sessions have been conducted since July 2021 on topics ranging from venture capital to the future of Hedge Funds in India.

Fin-League: FEC’s Fin-League quizzes put the students’ business acumen to test and help them keep their minds sharp and ready while fostering a competitive environment. Winners of Fin-League quizzes were awarded prizes and certificates. It was a series of quizzes with each quiz focusing on a particular field of finance and economics and involved learning in a fun way about the concepts relating to the field.

Activities on Social Media: FEC members released a small post every week to keep students upto-date with recent news in the financial world. It included crucial events like budget, company mergers, bankruptcies, famous economics concepts, success stories of companies, and many more. A new series of posters under the name of “FinBytes” was also started by FEC to apprise the students of financial terms like ratio analysis, hedge funds, and many more.

CLUB ACTIVITIES

Bridge the Gap: Bridge the Gap is a newly launched interactive discussion series. It aims to connect students with our alumni and other industry stalwarts through sessions and discussions on various relevant financial topics. Guest Talks: FEC regularly organizes industry guest lectures and workshops to give students more practical exposure. In the past, FEC has hosted CFOs and senior management from prominent companies belonging to the financial sector. AArunya 6.0: FEC organizes two events as a part of AArunya, the annual college fest. Insight Out, a valuation competition, and Round Table Conference, a case based competition.

AARUNYA 6.0

BUDGET PE CHARCHA FINBYTES & GIF

BIZVAL

FIN-LEAGUE

MOVIE REVIEW

Directed by: Ben Younger Distributed by: New Line Cinema

Release date: Feb 18, 2000

Running time: 120 minutes Country: United States of America

Language: English

SUMMARY

The story of "Boiler Room" centres on Seth, a 19year-old who runs an underground casino out of his apartment and lives comfortably as a result. When his judge father finds out, he raises holy hell. The young man, therefore, works as a broker for a "bucket shop" on Long Island, New York, that sells dubious or worthless securities via high-pressure telephone techniques. Seth thinks back on the time he spent running his casino and realises that at least he offered something that people wanted. J.T. Marlin is an equal opportunity employer. Already a billionaire, Jim (Ben Affleck) delivers a blistering introduction speech full of profanity and challenges to the recruits' masculinity, declaring, "We don't employ brokers here; we train new ones." Did they see "Glengarry Glen Ross?" he inquires. No doubt about it; he has. Although Mamet's portrayal of highpressure real estate marketers in this context is akin to the Bible, a person like Jim may only be able to appreciate the form without grasping the substance. Younger claims that Jim modelled his performance after Alec Baldwin's scenes in "Glengarry," and that Baldwin is an actor he aspires to emulate. Narrator and ugly young man Seth Davis (Giovanni Ribisi) learns rapidly how to separate fools from their money through telephone dreams about hot stocks and IPOs. These days, he says, everyone aspires to become a billionaire. He's selling the same false hope of financial security to J.T. Marlin that he does to strangers on the phone, which is ironic. Along with Seth, the phone war room is filled with brokers who casually exchange anti-Semitic and Italian slurs. Two of the most successful of these brokers are Chris (Vin Diesel) and Greg (Nicky Katt). After work, the men drink heavily and occasionally fight with the brokers of other households. Gambling at Seth's apartment seemed to have a positive effect on the kids' behaviour. We point out that both gamblers and stockbrokers place a financial bet on the outcome of an uncertain future event, but in the case of the former, the house nut is paid out to the loser while the winner in the latter case is kept by the winner. Expert gamblers say they don't put their faith in luck, but rather in their own research of the odds and strategies employed by their competitors

MOVIE REVIEW

and careful management of their bankrolls. There exists a consensus amongst investors. Obviously, no one ever claims luck has nothing to do with something unless luck is involved, but it doesn't stop them from saying it. Rifkin's moments when he lays down the law emanate a calm, evident authority that adds to the tension between Seth and the judge, which is one of the film's strongest qualities. The connection between them is explained by Seth's father when he brings it up: "Does a Connection Really Exist? How is that related? That doesn't make you my girlfriend. Your mom is an expert when it comes to interpersonal dynamics. I am your biological dad." Younger scripts their sequences so that they truly discuss goals, dreams, backgrounds, and concerns, as opposed to slipping into automatic movie romance, and I like that about their relationship, which develops in the film between Seth and Abby (Nia Long), the receptionist. At the end of a scene in which she shows compassion for him, she gently touches his hand. Seth points out that the company can't be a great place for a black lady to work because of the rampant racism there. Abby says she helps take care of her sick mother on an annual income of $80,000. They like each other and have overcome racial barriers, so the case is closed without a drawn-out, excruciating dramatisation of interracial dating. Younger's treatment of these scenes is a shame to movies where women serve no purpose other than to complete sexual acts. Everything about the performances is top-notch. Recently, I watched "Pitch Black," a science fiction film starring Vin Diesel as a violent inmate. The only person at the brokerage that Seth loves and trusts enough to approach is the broker, who is still harsh and has a shaved head. I find Diesel to be quite interesting. His efforts will yield fruit eventually. Rifkin's moments when he lays down the law emanate a calm, evident authority that adds to the tension between Seth and the judge, which is one of the film's strongest qualities. The connection between them is explained by Seth's father when he brings it up: "Does a Connection Really Exist? How is that related? That doesn't make you my girlfriend. Your mom is an expert when it comes to interpersonal dynamics. I am your biological dad." Younger scripts their sequences so that they truly discuss goals, dreams, backgrounds, and concerns, as opposed to slipping into automatic movie romance, and I like that about their relationship, which develops in the film between Seth and Abby (Nia Long), the receptionist. At the end of a scene in which she shows compassion for him, she gently touches his hand. Seth points out that the company can't be a great place for a black woman to work because of the pervasive racism there. Abby says she helps take care of her sick mother on an annual income of $80,000. They like one other and have overcome racial boundaries, thus the case is closed without a drawnout, excruciating dramatisation of interracial dating. The movie "Boiler Room" has numerous problems. I still don't understand what kind of deal Seth was trying to negotiate with his father during that crucial evening meeting, and I find it too contrived that Abby doesn't tell him something he needs to know. There's also a scene where a man calls her by name, and Seth jumps to a conclusion when, in fact, that man would have every reason to know her name. But these are all thoughts that came to me later. All of the characters, good and bad, are complex and culpable; we can understand their motivations and sympathise with their plights, which kept me on the edge of my seat throughout the film.

BOOK REVIEW

Author: Saurabh Mukherjea, Rakshit Ranjan, Salil Desai

Publisher: Penguin Random House India Pvt. Ltd

Pages: 256

SUMMARY

Over the last few years, there has been a growing realization among Indians that their life ' s savings, the bulk of which are parked in physical assets like real estate and gold, are unlikely to help them generate sufficient returns to fund their financial goals, including retirement. Their view is that equity is the way to go as they bust certain myths on savings. Gold is good but is positively correlated to equities and hence there is no advantage of diversification. Debt funds are sub-optimal, and you may not be better off over the long run when compared with low rewarding bank deposits. Real estate can get you something like 3-4% as rentals, but given the cost of borrowing is 7%, you are not better off. It is different in the West where you get similar returns, but the cost of capital is lower.

At the same time, many have lost their hard-earned money trying to invest in financial assets, including debt and equities. Such losses have occurred due to many reasons, such as corporate frauds, weak business models and misallocation of capital by the companies in whose shares unsuspecting investors parked their savings. What options do Indian savers then have to invest in, and build their wealth?

Diamonds in the Dust offers Indian savers a simple, yet highly effective, investment technique to identify clean, well-managed Indian companies that have consistently generated outsized returns for investors. Based on in-depth research conducted by the awardwinning team at Marcellus Investment Managers, it uses case studies and charts to help readers learn the art and science of investing in the US$3 trillion Indian stock market. The book also debunks many notions of investing that have emerged from the misguided application of Western investment theories in the Indian context. Vital and indispensable, this book will serve as the ultimate manual on investing and provide practical counsel to readers to achieve their financial goals.

Aman Mundhra

Vishesh Mehra

TEAM FEC

SENIOR COORDINATORS

Vaibhav Kapoor Saurodeep Chatterjee

Ishika Agarwal

JUNIOR COORDINATORS

Ritvik Agarwal Vedant Mittal

Rujuta Agrawalla Harsheen Kaur

Madhav Tapadia

CROSSWORD

ACROSS DOWN

1.This is the difference between the selling price of goods and what they cost to buy (two words). 2.Trainer's name

4. These are things which are owned by a business such as buildings, vehicles, stock and money in the bank.

5. This is the profit left after all overheads have been taken off (two words).

7. The amount of money that a company actually receives during a specific period, including discounts and deductions for returned merchandise.

8. These are debts that a person or an organisation owes. 3. You make this if you sell or dispose of a long−term asset (such as a building) for more than it cost you. Two words ______ G____

6. These are short−term assets which are constantly changing in value, such as stocks, debtors and bank balances (two words) 9. An ______ is an independent examination of an organisation's records and financial statements (report and accounts). 10. Any of the costs involved in running the business.

12. This is the assets (or money) available to an organisation to re-invest and create new assets. It starts with C.

13. A detailed projection of all estimated income and expenses based on forecasted sales revenue for a year (two words) O_______ ________ 14. A __________ is one which is intended to be used for several years and not be converted into cash. Examples are buildings, machinery and vehicles (two words)

11. This is the value of a company’s assets minus any liabilities. Basically, the value of something less the money owing on it.