Understanding How Memory Works

Success in the CFA Level I exam depends not only on the hours you put in, but on what you are actually able to retain and recall when it counts. 

Many candidates underestimate how much sheer memorization plays a role alongside understanding. The curriculum is full of formulas, definitions, and lists that must be at your fingertips under time pressure. 

To manage this, you need to lean on evidence-based techniques such as active recall and spaced repetition, both of which help move concepts from short-term awareness into long-term memory.

The Forgetting Curve

In the 19th century, psychologist Hermann Ebbinghaus discovered the “forgetting curve”: after a single study session, humans can forget up to 90% of what they learned within a month. 

The steepest drop happens in the first few days. 

For CFA Level I, where the volume of content is immense, this is a dangerous reality. If you study portfolio theory today but never revisit it until exam week, you may recall only fragments. 

What Ebbinghaus showed is that the first 24–48 hours after learning something are critical. Timely reviews can dramatically slow down forgetting and lock information into memory.

Memory Processes: Encoding, Storage, and Retrieval

Think of learning like packing a travel bag. 

Encoding is when you first put an item in the bag;

Storage is whether it stays there securely as you move around;

Retrieval is being able to pull it out quickly when you need it. 

Unfortunately, unlike luggage, our brains don’t hold on to everything we “pack.” Unless we keep reaching in and using the information, it tends to fall out. For CFA candidates, that means if you simply read through the definition of the Sharpe ratio once, chances are you won’t recall it clearly on exam day. 

Only by regularly retrieving it—testing yourself on the definition and applying it to practice questions—will you keep it in the bag.

Types of Memory

It helps to recognise that different types of memory are involved in CFA preparation:

Declarative memory is conscious. It includes semantic memory—facts like “EBITDA = Operating Profit + Depreciation + Amortisation”—and episodic memory, such as remembering where you were when you first learned about IFRS vs. GAAP adjustments.

Procedural memory is unconscious. It covers skills and habits, like fluently entering cash flows into your BA II Plus calculator or instinctively setting up a time-value-of-money problem.

Knowing this distinction matters. Flashcards are great for semantic memory (formulas, definitions), while repeated calculator drills help procedural memory until the steps feel automatic.

Overcoming the Forgetting Curve

So how do you overcome the forgetting curve? 

The answer is spaced repetition—reviewing material at intervals that gradually increase over time. Each time you force your brain to recall something just as it is fading, the memory trace strengthens.

For example, after studying hypothesis testing, you might test yourself the next day, then again three days later, then a week later, and then two weeks later. 

Each review makes it less likely you’ll forget. By the time exam day arrives, you will have pulled that information out of storage so many times that it becomes almost automatic.

This method works best when combined with active recall. Don’t just re-read your notes on the capital asset pricing model; close the book and try to write out the CAPM formula from memory, then explain what each variable means. Digital tools like Anki or Quizlet can automate this by resurfacing the flashcards you struggle with more often and spacing out the ones you know well.

Spaced Repetition Tools: CFA Flashcards and Practice Questions

To make spaced repetition practical, CFA candidates often rely on flashcards. These can be digital decks or physical cards. 

Each should contain one formula, definition, or concept. For example: one card for the Gordon growth model, another for the types of audit opinions, another for the assumptions of CAPM. 

Reviewing them regularly—ideally daily in the run-up to the exam—ensures high-frequency exposure to the most testable material.

Practice questions serve a similar function. After solving a question on, say, bond duration, pause to see if you can recall all related formulas (Macaulay, modified, and effective duration). 

Other small strategies include closing your notes at the end of a study session and summarising everything you remember in one minute, or explaining a concept aloud to an imaginary colleague. These exercises may feel awkward at first, but they are powerful in solidifying memory.

Managing Cognitive Load

Another science-backed consideration is cognitive load theory. Our working memory can only juggle a handful of pieces of information at once—often around four. When you first tackle a dense CFA concept, like calculating covariance or understanding deferred tax liabilities, the load can feel overwhelming. To manage this:

Pre-train with foundations. For example, reviewing algebra and basic probability before diving into regression analysis makes the later material far less taxing.

Use multimodal learning. Combining visual and auditory channels improves retention. For instance, watch a video on bond pricing while sketching a timeline of cash flows.

Avoid split attention. Don’t keep a formula in one book and the explanation in another. Place them side by side, so your brain integrates them without extra strain.

By managing load, you prevent overwhelm and free up mental resources for understanding.

Chunking: Making Information Stick

One of the most effective ways to tame the vast CFA syllabus is through chunking—grouping related pieces of information so they form a single, meaningful unit in memory.

Instead of remembering each financial ratio in isolation, group them by category: profitability ratios, liquidity ratios, solvency ratios. 

Instead of treating every time-value-of-money formula as separate, see them as variations of one framework. By building these clusters, you can recall an entire set when prompted by one cue.

Mnemonics

Mnemonics are the natural extension of chunking. Where chunking groups ideas, mnemonics compress them into a single, sticky handle you can pull under pressure. 

They’re especially helpful for lists (qualitative characteristics, Standards categories), multi-step procedures (hypothesis testing), and families of formulas you need to keep straight (time-value-of-money variations, return decompositions).

The technique is simple: turn lists into an acronym or a short, vivid sentence built from the items’ initial letters. For instance, some candidates use “DEAD CLIC” in accounting (Debit Expenses, Assets, Dividends; Credit Liabilities, Income, Capital) to avoid sign errors when they’re rushing. 

There are two rules to bear in mind in order to make mnemonics an effective way to learn:

It is important with mnemonics to make them yourself — don’t leave it up to an AI chat bot. 

The act of generating the phrase is a form of what’s known as “elaborative encoding”: you engage with the meaning while you build the cue, which strengthens memory far more than copying someone else’s trick. 

It is also important to rehearse them with spaced recall. A mnemonic you don’t revisit is just decoration. Work your cues into flashcards and end-of-session “one-minute brain dumps” so they surface automatically when a question stem turns up the heat.

Visual Charts and Diagrams

Some concepts stick better when you draw them out. 

For example, drawing a timeline for time value of money problems can help organize cash flows chronologically.

Drawing the yield curve and marking forward rates, or sketching a decision tree for hypothesis test outcomes (Type I vs II errors), can also imprint the logic.

Transform wordy information into visual tables or flowcharts wherever possible.

A great example is Ethics case analysis: many candidates use a decision flowchart (e.g., “Is there a conflict of interest? -> Disclose or avoid” etc.) to navigate ethical dilemmas. If you’re a visual learner, make use of that – condense each reading into a one-page mind map or diagram of how key ideas connect.

Even if you never look at that map again, the process of creating it engages active learning.

The Importance of Variation

Finally, don’t fall into the trap of studying one subject in long, uninterrupted blocks. Research shows that interleaving—mixing topics within a study session—improves retention by forcing your brain to continually identify which approach to use.

This is especially relevant for CFA Level I, where questions jump unpredictably from Ethics to Quant to FSA within the same exam session. 

Instead of devoting a whole week to Quant Methods, try a day where you do Quant in the morning, some FSA in the afternoon, and a few Ethics questions in the evening. Linking related areas—like studying hypothesis testing alongside regression analysis—also strengthens conceptual connections.

Similarly, varying your study environment helps. Research has shown that studying in different contexts (home, library, café) enriches the memory trace, making it more resilient. 

Muscle Memory: Using Your Calculator

Many CFA problems can be done faster using built-in functions rather than brute-force calculation.

For instance, use the cash flow worksheet for NPV problems instead of discounting each cash flow manually. 

Use the bond worksheet to find yields or prices given coupon, maturity, etc. 

These save time if you’re adept with them. During practice, identify which problem types you handle faster on the calculator. Be comfortable with your calculator’s features and know how to use them for the required learning outcomes – this can save you vital minutes and reduce errors.