The CFA Program teaches the core tools used in investment analysis and portfolio management. It is built around finance, accounting, economics, ethics, and risk, with a strong focus on how to evaluate investments and make decisions using facts, not guesses.

For Level I, the goal is not just memorisation. It is to understand the basic language of finance well enough to read numbers, compare choices, and think clearly about value, risk, and return.

1. Time Value of Money

The Time Value of Money is one of the most important ideas in finance.

A dollar today is worth more than a dollar tomorrow because today’s dollar can be invested and earn a return.

This is why finance professionals discount future cash flows back to today’s value. It helps answer a simple question: "is this future money worth what I am paying now?".

• Present value tells you what future money is worth today. 

• Future value tells you what today’s money will grow to later. 

• Discounting helps compare choices that happen at different times. 

• Annuities are streams of equal payments; an annuity due means payments at the beginning of each period.

CFA-Style Example Question – Annuity Due (Using the BA II Plus)

Q: "What is the maximum an investor should be willing to pay for an annuity that will pay $10,000 at the beginning of each year for the next ten years, given that the investor wants to earn 5.75% compounded annually?".

Steps on the BA II Plus (treat this as an annuity due):

1. Set the calculator to BGN mode for Beginning-of-Period payments.

2. Clear previous TVM entries (2nd → CLR TVM).  

3. Enter:

• N = 10 (ten payments)

• I/Y = 5.75 (required annual return)

• PMT = 10,000 (cash inflow each year)

• FV = 0 (no lump sum at the end)

4. Compute PV.

A: The result is the maximum price the investor should pay today for that annuity. If the market price is higher than this PV, the investment does not meet the 5.75% required return.

Tip: For every TVM problem, first decide if cash flows are at the beginning (annuity due) or end (ordinary annuity). This avoids many exam mistakes.

2. Economics and Markets

The CFA curriculum covers basic economics because markets do not move in isolation. Prices, inflation, interest rates, supply, and demand all affect investment values.

In Canada, the Bank of Canada uses monetary policy to support stable inflation. Its inflation target is 2%, with a control range of 1% to 3%, and it adjusts the policy interest rate to help keep inflation near that target.

• Supply and Demand: help explain price changes.

• Monetary Policy: is set by the central bank through interest rates.

• Fiscal Policy: comes from government tax and spending decisions.

• Inflation: reduces purchasing power over time.

Tip: When interest rates change, they can affect borrowing costs, bond prices, business activity, and stock valuations.

3. Financial Statements

The CFA teaches how to read the three main financial statements:

• Balance sheet

• Income statement

• Cash flow statement

These statements help show what a company owns, what it owes, how much profit it makes, and how cash moves through the business.

Cash Flow matters because profit on paper is not the same as cash in the bank. A company can report earnings and still run into trouble if it cannot generate enough cash to operate.

• Balance Sheet: a point-in-time snapshot of assets, liabilities, and equity.

• Income Statement: performance over a period of time.

• Cash Flow Statement: actual cash coming in and going out.

• Operating Cash Flow, Investing Cash Flow, Financing Cash Flow: show different parts of the business.

Tip: Do not judge a company from earnings alone. Check cash flow too.

4. Risk and Return

A major theme in CFA Level I is the trade-off between Risk and Return. In general, higher expected return comes with higher risk, but that does not mean every risky investment is a good one.

Diversification is one of the main tools for managing risk. By holding different investments, you can reduce company-specific risk, though you cannot remove all market risk.

• Risk and Return: move together in many investment decisions.

• Diversification: reduces unsystematic risk.

• Systematic Risk: affects the whole market and cannot be diversified away.

• CAPM: is used to estimate a stock’s required return based on its risk.

Tip: Good investing is not about avoiding risk completely. It is about taking the right risk for the return you need.

5. Corporate Finance

Corporate Finance: teaches how companies make spending and financing decisions. The basic idea is simple: management should use capital in ways that create value, not waste it.

Capital Budgeting: is the process of deciding whether a project is worth doing. The main tools are NPV and IRR, which help compare the cost of a project with the cash it is expected to produce.

• NPV: measures value added in today’s dollars.

• IRR: is the discount rate that makes NPV equal zero.

• Projects with positive NPV are generally worth considering.

• Companies also study how to raise money through debt, equity, or retained earnings.

Tip: A project only makes sense if the expected value created is greater than the capital spent.

6. Portfolio Management

Portfolio Management: is about building a plan that fits a person’s goals, time horizon, and risk tolerance. In practice, this is where the CFA moves from theory to decision-making.

A written Investment Policy Statement (IPS), helps define objectives, constraints, and how the portfolio should be managed. Asset allocation is then used to decide how much goes into stocks, bonds, and other assets.

• The IPS sets the investment rules and goals.

• Asset Allocation: is usually the biggest driver of portfolio behaviour.

• Rebalancing: helps keep the portfolio aligned with the plan.

• Risk Tolerance and Time Horizon matter more than headlines.

Tip: A portfolio should be built around the investor’s purpose, not around what is popular this month.

7. Ethics

Ethics is a central part of the CFA Program, not an optional extra. The CFA Institute Code of Ethics and Standards of Professional Conduct are designed to support integrity, professionalism, and public trust in the investment industry.

This matters because finance depends on trust. If advice, analysis, or reporting is misleading, the whole system becomes less useful and less reliable.

A CFA charterholder has a Fiduciary Responsibility:

• Put client interests ahead of personal gain.

• Be honest, objective, and careful with information.

• Follow the law and professional standards.

• Avoid misrepresentation and misconduct.

Tip: In finance, technical skill matters, but trust matters just as much.

The CFA teaches you how to think in a structured way about money, risk, companies, and markets. It gives you the tools to read financial statements, evaluate investments, and make decisions based on evidence.

Tip: Understand the numbers, respect the risk, and use a clear process. That is what turns finance from guesswork into a skill.

This article focuses primarily on the core concepts taught at CFA Level I. While it does not dive into advanced Level II and III specifics (multi-stage equity valuation, complex derivatives, or deep portfolio strategies) the key pillars covered here (Time Value of Money, financial statements, risk and return, portfolio management, and ethics) form the foundation for the entire CFA Program. Designed to give beginners and Level I candidates a clear, practical understanding of what the CFA actually teaches, this post outlines the essential themes and fundamental skill set that all three levels keep returning to.

1. CFA CBOK

2. AlphaBetaPrep

3. Charterly

4. CFA Institute

5. AnalystTrainer

6. CFAC

If you are seriously considering the full CFA designation we strongly suggest using this resource: Mark Meldrum