How to Prepare for Actuarial Exams
Actuaries are compensated very well. And just like any other well-paid profession, it takes a lot of work to get there. But unlike doctors or lawyers, actuaries need to, in order to become fully credentialed, pass a series of difficult tests called Actuarial Exams. These are very hard. Very very hard. The preliminary exams are 3 hours long, consisting of 30-35 multiple choice problems, and the pass rate is typically only 30-40%.
As a result of the overwhelming amount of material, one frequently asked question among student actuaries is for a good study method. The obvious answer to this question is that everybody studies differently. That being said, there are a few common factors in most successful study techniques and many resources that can be very helpful.
The following is an effective study method that takes these factors and resources into account.
1. The first step is to find the exam syllabus online at BeAnActuary.com.
This syllabus will outline the material that will be covered on the exam, which will give you a good idea of what and what not to study. This material sometimes varies depending on the month the exam is offered (i.e. the sitting), so be sure to find the syllabus that corresponds to the month during which you are signed up to take it.
2. The second step is to get yourself a good study manual.
The most popular textbook study manuals are from ACTEX Publications and Actuarial Study Manuals (ASM). Some alternatives (or supplements) are The Infinite Actuary (TIA) online seminars and the Coaching Actuaries eCourses and ADAPT software. As these seminars and eCourses can get a bit pricey, most stick with one of the aforementioned textbook manuals. Free, comprehensive and continuously updated study manuals by Marcel B. Finan can also be found online at A Probability Course for the Actuaries: A Preparation for Exam P/1 and A Basic Course in the Theory of Interest and Derivatives Markets: A Preparation for the Actuarial Exam FM/2.
3. Once you have your textbook, your third step is to read through it while taking notes and doing some problems along the way.
This will most likely be the majority of your studying. It will help you to get a grasp of the material that will be covered on the exam. If you come across a section that is not mentioned on the syllabus, a question on that material will probably not turn up on your exam. But be careful: if that topic builds on a topic that is mentioned on the syllabus, you might want to be safe and familiarize yourself with the concept.
And this next tip is very important: You need to know the material. Like, really KNOW it. You need a DEEP UNDERSTANDING of all topics on the syllabus. Just knowing which numbers to plug where won't cut it. You need to know why each formula is structured the way that it is and be able to manipulate it accordingly on the exam. Most study manuals have an adequately in-depth explanation for each topic, so don't skip over it!
4. Once you have done this, your fourth step is to make a study packet that exactly follows the exam syllabus.
This 10-20 page, formula-dense packet will be used from this point on as the replacement for your study manual. Don't skip any bullet points, and make sure you write/explain things in a language that you will understand. Don't forget to number the pages, and draw pictures every now and then. Even decorate the thing if you want. That's what I did.
5. Once you have your beloved formula-dense packet, your fifth step is problems, problems, problems.
This is the most important step. You will want to be doing nothing but problems for at least the last 3 weeks leading up to D-Day. While going through these problems, the packet that you made will be very helpful. The Society of Actuaries provides practice problems and solutions (found on your exam syllabus from step 1) which will be most indicative of the style of problems that will be on the exam. Make sure that you can do all of these problems quickly and understand each one to the core. It may be helpful to make notecards of the ones you have trouble with and go over them in your spare time. Your study manual will most likely come with a plethora of sample problems. Most study manual prefaces insist that you complete all questions. You may want to use discretion. You can also find more sample problems online: many of which can be found on ActuarialOutpost.com. It would be wise to make an account on this site and ask questions when you have them. Additionally, your professors, TA's and peers will be more than willing to help you out.
During this time you should be committing to memory the information that you have been using from your packet.
6. Now you are at step six: take practice exams under strict exam conditions.
Some study manuals provide a few practice exams of varying difficulty. You can also purchase sample exams online. It is important to take these exams under strict exam conditions (e.g. time yourself, have no distractions, no breaks), all of which can be found at BeAnActuary.com and in the confirmation email you received from Prometric when you signed up for your exam. While taking these practice exams, you should only refer to the packet you made if you absolutely need to in order to do the problem(which should be almost never). Although the number of questions you will need to answer correctly for a pass will change from sitting to sitting, on 35-question practice exams you should aim to be consistently answering 25 or more correctly.
7. And at step seven: do your final preparations and pass that exam.
Make sure that you have everything on your formula packet memorized, and go over all the material a few more times. As everybody says: don't work too hard the night before. Go to your favorite burger joint with a friend and just relax. Get plenty of sleep, and don't forget to eat a healthy breakfast. Make sure to get there early, and review your notes before you start the exam. And don't take your firearm or switchblade into the testing facility.
Getting that preliminary pass will be well worth all your hard work!
Heres another link to the DW Simpson Salary Surveys.
Get to know your calculator. There are many useful shortcuts that can save you valuable minutes during the exam. Also make sure it's on the list of approved calculators... you don't want to make that mistake.
Start early. The worst thing that can come from starting earlier than necessary is a more relaxed study schedule and a better understanding of the material. The worst (and very likely) thing that can come from starting too late is not having enough time to adequately study, failing the exam, and going through the whole process all over again. Giving yourself anything less than 10 weeks to study is cutting it close.
ActuarialOutpost.com is a great resource: there is more information on there about the exams and the profession than you will ever want to know.
Actuarial Ninja blog offers advice about actuarial exams and careers (how to apply, interview tips, resume advice, etc.)
Written by Michael Adams
UCSB Actuary Club Exam Specialist