CFA Level 1 Prerequisite Readings ("Pre-Reads") - HOW MUCH TIME Should You Spend Reading Them?

30 Aug 24

Published by Chalk & Board
Expert Advice from Nathan Ronen, CFA®

If you're preparing for the CFA Level® I (“Level 1”) exam in November 2024, February 2025, May 2025, or later, you've likely encountered the CFA program pre-readings or "pre-reads" in the CFA curriculum. These foundational readings cover essential CFA exam topics in Economics, Quantitative Methods (Quant), and Financial Statement Analysis (FSA). A common question among candidates is whether these CFA pre-readings are necessary, how much time should be devoted to them, and whether they’ll be tested directly in the exam.

What Are CFA Level 1 Pre-Readings?

The CFA Institute has restructured the Level 1 curriculum to be more compact by moving some of the introductory and foundational CFA curriculum readings into a separate category known as pre-readings (or pre-reads). These readings are designed to provide a base-level understanding of key CFA exam concepts that will be built upon in the main curriculum. Specifically, the CFA Level I pre-readings cover:

  • Economics: Fundamental concepts in micro and macroeconomics.
  • Quantitative Methods: Basic statistical tools and techniques.
  • Financial Statement Analysis: Core principles of accounting, including balance sheets, income statements, and cash flow statements.

Do You Need to Spend Time on Pre-Readings?

The CFA Institute states that 90% of CFA candidates are already familiar with the material covered in these pre-readings, suggesting that they are not mandatory. However, this can be misleading, especially for candidates who completed their college education several years ago or those who feel they may not have fully retained everything from their studies.

Here’s why I, Nathan Ronen, believes you should not skip these pre-readings as a CFA charterholder and instructor:

  1. Building a Strong Foundation: The CFA pre-readings are designed to ensure that you have a solid understanding of the basic concepts that will be critical as you dive deeper into the CFA Level 1 curriculum. Skipping these could result in gaps in knowledge that might make the core material more challenging.
  2. Indirect Testing: While the CFA Institute has made it clear that you won’t be tested directly on the pre-readings, the concepts covered in them are foundational. For example, understanding the balance sheet’s components from the pre-readings will be essential when you encounter more complex financial analysis topics later in the curriculum. The exam questions may assume that you have this foundational knowledge, indirectly testing your understanding.
  3. Customized Approach: I recommend a strategic approach to these pre-readings. Instead of diving into them in detail, skim through the material. If a topic feels familiar, move on. If something seems unclear or you don’t remember it well from your previous studies, take the time to review it. This method ensures that you are well-prepared without spending unnecessary time on topics you already know.

How Much Time Should You Spend on Pre-Readings?

I suggest allocating about two weeks per topic—Quant, Economics, and FSA—if you have the luxury of time. However, if your exam date is fast approaching, you can condense this review into a few days by focusing only on the areas that are unfamiliar or need a refresher.

  • Quantitative Methods: Spend time on statistics and probability concepts, especially if they were not your strong suit in college.
  • Economics: Review supply and demand, market structures, and economic indicators.
  • Financial Statement Analysis: Pay close attention to the structure of financial statements, accounting principles, and key metrics like comprehensive income.

Why You Shouldn’t Skip Pre-Readings Entirely

Even if you feel confident in your understanding of these topics, skipping pre-readings entirely can be risky. The CFA Level 1 curriculum is dense, and having a solid grasp of the foundational material can make your study process smoother and more efficient. Moreover, the pre-readings can help refresh your memory and boost your confidence as you tackle the more complex concepts in the main curriculum.

Final Thoughts: Navigating Pre-Readings for Success

In conclusion, while pre-readings are not directly tested in the CFA Level 1 exam, they play a crucial role in preparing you for the curriculum ahead. My advice is to approach these readings strategically—skim through them, focus on areas where you need a refresher, and don’t underestimate their value.

By investing a bit of time in these pre-readings, you’ll be better equipped to handle the core material, potentially saving you time and stress as you prepare for the exam. Remember, every candidate’s background is different, so tailor your study approach to your own needs.