The biggest losers?
Bad investment research is useless
If you did, you lost your shirt. The market just shed a couple more points, reversed, and then kept going, and going, and going. This is why technical analysis is utterly useless as an investment strategy. How many hedge funds use a pure technical strategy on a standalone basis? At best, it is just one of tools you need to trade the market effectively. The shorter the time frame, the more accurate it becomes.
On an intraday basis, technical analysis is actually quite useful. But I doubt few of you engage in this hopeless persuasion. Leave it for the kids. This is why I advise portfolio managers and financial advisors to use technical analysis as a means of timing order executions, and nothing more. Most professionals agree with me. But nothing says a good understanding of finance is a bad thing whether or not you agree with the theories and nothing says you MUST use them in your career. Then learn faster lol. If you end up spending less than hours on each level, you get more bang for your time.
A small sample size, but of the roughly half a dozen "value" managers I know not a single one has ever taken a CFA test. I find the accounting in L2 to be useful. Some of the material is pointless. Obviously I've never built a dividend discount model, calculated information ratios for the Treynor Black model, or priced bond options by building a big tree and going backwards for bimodal "up" or "down" interest rate shocks. It is essentially an insurance policy. Without a bunch of glossy credentials you have to hang your hat on performance which is how it should be , but if for some reasons an individual hits a bump on the path in the HF space its nice to have something to fall back on.
I agree with this.
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Odd to see such vitriol against the exams - in investing as in life I put a premium on knowing what I don't know. The CFA has been irritating, time-wasting, and no doubt mostly just an exercise in rubber stamping my resume. That said, I'm glad I've gone through it. It's important to have a solid knowledge base that includes a good understanding of the principles I disagree with. Railing against MPT or the DDM without really knowing what they are or why they were developed just comes across as ignorant.
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I happen to like DDM as a teaching tool, for example. It's hard to imagine anyone actually valuing a stock that way, but it's a helpful construct to force you to think about the value of equities as a discounted stream of future cashflows, and cashflows you'll only have a claim on to the extent management returns cash to shareholders. It refocuses your attention on capital allocation in a useful way. The CFA is like taking an introductory philosophy course in college - you'll typically read some Marx and some Smith, maybe both the Bible and the Koran, not to mention the full range of political theories from Plato to Hobbes to Locke.
You will disagree with some, maybe all of what you read, but you still benefit from the exposure. Just as a few survey courses scarcely qualify you for any job, it's a mistake to think of the CFA as some kind of career panacea. Doubtless it's of little value to someone with many years of experience. But for most people, especially early in their careers, it is a convenient way to learn quite a bit of background material related to investing.
And as others have mentioned, there are a few useful nuggets in there. I'm sitting for Level 2 in June and while I think a decent amount is rubbish that I will never use, I have certainly learned a lot from it, probably more than I actually learned in undergrad. As mentioned, the FRA material is phenomenal for anyone that wasn't an accounting major in undergrad.
Level 2 seems to be heavy on the valuation principles which is great for me. I hate quantitative methods but it does teach a new found respect for statistics and how everything is interrelated. Easy on the MBA and Cfa loving. Both are much more relevant to am than to hf.
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Hardly any top hf manager has a Cfa and only few have an MBA. Cfa is an epic waste of time that's completely useless unless your goal is closet indexing at a long only am, MBA is more relevant there as well.
Given long onlies are much more marketing than performance driven given almost all of them just closet index and underperform anyway , useless credentials become much more important. This is obviously a generalization some boutique long onlies do Very well, and most hfs underperform as well but hey. Not even sure what the Cfa even signals, that you can study super boring useless stuff for long hours? It's almost a counter indicator to intelligence, if you are the smartest guy in the room you don't need some Designation to reassure yourself.
Whenever I hear someone use hyperbolic phrases full of intensifiers like "completely useless" on a topic for which there is lots of disagreement, it becomes evident that they aren't thinking objectively and their view on that topic can be safely ignored. Most of the above posters are referring to am, despite this thread being in the hf forum, this just unnecessarily confuses people outside the industry and may get them to do a Cfa which as far as hfs are concerned is last completely useless except for the few shops the are full of ex long only guys despite not needing one.
Yea I always see it as useless when someone has a proven and tested grasp of a broad array of financial products, accounting and has proven their drive and commitment. Anyone with the necessary experience to work at a hf will have shown drive and commitment in numerous other ways and have the knowledge of accounting and finance needed. If you come from the traditional path and need the Cfa to demonstrate drive and commitment then I don't know what to say lol.
Anyhow this argument is mood, people with the Cfa will respect others with it, people without it won't care, most people at hfs don't have it so most won't care. But there's opportunity cost and Cfa may be one of the lowest value add ways to develop your fundamental investing skill.
The what others are thinking point is interesting, but what pc of Cfa holders use ddm, what pc has what level and what curriculum do they use? Lvl 1 mainly focuses on basics of finance, you don't need to get the designation to know that other market participants know what time value of money is what a swap is and that hopefully none of them is stupid enough to use ddm lol.
I see your point. But stand by my view. It was rather narrow minded of you to choose a simple swap as your example, my point rests less on the complexity of the products but the awareness and understanding without having to go on to investopedia. I used simple examples cuz I'm only familiar with level 1, I do think your point has merit and we can agree on there being some intrinsic value in knowing what other market participants have been taught.
However, the thought of denying myself beautiful, rare strip steaks for the next years fills my heart with dread filling my heart with cholesterol is much more appealing.
I understand that my fondness for steak means I may have to work longer or have less money saved. And this kid is alright with that choice. Yes, there are trade-offs and choices that need to be made to reach your goals, but the idea of abstaining from any enjoyment for next 20 years appeals to very few of us.
Data Is Useless Without the Skills to Analyze It
The true purpose of working with a financial planner is to help figure out your goals and how to make them happen. When you hear the advice from talking heads, ask yourself this question: What are the odds that someone with a target audience of millions will have the perfect solution for my unique situation? Even more dangerous, they might be making a shocking statement just for the purpose of getting a headline. Investment advice offered through Private Advisor Group, a registered investment advisor. Your goals deserve more respect than that!