CFA makes for better personal investments

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jhwesterfield

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Just a question: In your experience do you feel like you make better personal investements because of the CFA? Thanks for responding.
 
I agree. After going through the CFA program, I am sure I know more about finance than 99% of the population, which is probably just enough to make me dangerous. Also, I am beginning to believe that being a “stupid” retail investor can actually be an advantage. A lot of people are making money in energy right now (well, not in the last week or so), while I am too bearish on energy to participate in the bubble thanks to my now greater understanding of financial concepts.
 
No. CFA is mostly theoretical mumbo jumbo. Most of it isn’t even used in practice.
Nothing on modeling. I mean, modeling… a key requirement for almost anyone working in the biz.
 
True about modeling … but you need a lot of the skills that CFA propagates in order to model with good detail.
My actual investment returns were a little higher before I completed cfa program because I was taking more risk and the areas that I like to invest were just doing better. I am still beating “the market” now, however, now I understand about 20% of what I see out there where as before I understood about 10% of what I saw out there.
 
jlx177,
yes you’re completely right …you have to have hard skills like VBA, Matlab or even C++ to get a decent job in investment management
 
yes, it’s helped me realize that it’s pretty dumb for me to try to beat the market on a risk adjusted basis, so I quit trying.
 
I’ve actually benefited a lot more immensely (is that a real phrase?) from my job speaking to hedge fund managers than from learning from books. I was up 62% in 2007 and 31% 2008 YTD (was as high as +55%) in flat-to-down markets based on strategies I’ve learned and ideas I’ve picked up on from talking to very smart investors.
 
hey farley, quick question.
suppose you got sick of running a fof and wanted to actually work AT a hedge fund (either as a pm or analyst). How easy would the transition be? Would they be receptive or would you have a tough time because your skill set is different?
 
Some people have done it but it’s not easy unless you have an extensive background in fundamental research. More frequently I see FOF people move to the hedge fund side to take a business development or investor relations role instead. These types of positions at large hedge funds can pay more than research positions on the FOF side.
 
CFA gave me a lot of the vocabulary and concepts that I need to speak intelligently about investment management. I don’t know all that much about specific companies and industries from CFA stuff, but I do have other parts of my professional background for that.
As for personal investments, CFA has probably made me more aware of the importance of diversification and how hard it is to beat the market average, and therefore reduced the number of completely dumb things that I might do. However, the number of possible completely dumb things is very very large, so just because it’s reduced the number doesn’t mean that I can’t do dumb things anymore (witness my TIPs disappointments).
 
Besides the Sharpe Ratio and Coefficient of Variation what the other metrics used to adjust portfolio returns for risk?
What is the most widely used method in practice?
 
Gouman Wrote:
——————————————————-
> Besides the Sharpe Ratio and Coefficient of
> Variation what the other metrics used to adjust
> portfolio returns for risk?
>
Treynor measure, Jensen’s Alpha, Information Ratio, and M^2 (which is really just Sharpe multiplied by the SD of the market).
Fresh from the L3 curriculum
> What is the most widely used method in practice?
Sharpe ratio seems to be the most common, but Jensen’s Alpha comes in a lot, as well as Information Ratio (for things managed relative to a benchmark).
 
olzhik Wrote:
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> jlx177,
> yes you’re completely right …you have to have
> hard skills like VBA, Matlab or even C++ to get a
> decent job in investment management
I politely disagree. Depends on the firm, investment philosophy, etc.
It also depends on what you consider a decent job I suppose too.
 
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