Equity Investments

Equity Investments form a critical component of the CFA Level 1 curriculum, focusing on the analysis and valuation of ownership interests in companies. This section covers fundamental concepts for evaluating equity securities and understanding their role in investment portfolios. The curriculum begins with equity markets and instruments, examining various types of stock (common and preferred), private versus public equity, and global market indices. It explores market organization, trading mechanisms, and order types that affect execution. Industry and company analysis follows, teaching candidates to evaluate competitive positioning using frameworks like Porter's Five Forces and assess company-specific factors through tools such as SWOT analysis. Equity valuation forms the core of this section, introducing several approaches: 1. Dividend discount models (DDM) - valuing stocks based on expected future dividends 2. Free cash flow models - determining value from projected cash flows 3. Price multiple methods - using ratios like P/E, P/B, and EV/EBITDA for relative valuation 4. Asset-based valuation - estimating worth based on underlying assets Candidates learn to calculate intrinsic value using these methods and compare results with market prices to identify investment opportunities. The section also covers equity market efficiency, exploring the Efficient Market Hypothesis and its implications for active management strategies. Finally, it addresses practical aspects of equity portfolio management, discussing investment strategies (value vs. growth, passive vs. active), position sizing, and risk management techniques specific to equity portfolios. Mastering Equity Investments requires understanding both quantitative valuation techniques and qualitative analysis skills to evaluate competitive advantages and management quality - essential knowledge for anyone pursuing the CFA designation.

Equity Investments form a critical component of the CFA Level 1 curriculum, focusing on the analysis and valuation of ownership interests in companies. This section covers fundamental concepts for ev…

Concepts covered: Industry and Company Analysis, Security Market Indices, Equity Valuation: Concepts and Tools, Market Organization and Structure, Market Efficiency