How to prepare for the GMAT

Since I wrote my first post on my MSc studies some months ago I received a few emails from prospective students applying to universities. After all, it's that time of the year again. Two questions that came up most often are:

1) What GMAT score should I get in order to be accepted into the MBA/MSc program of my choice?

2) How to prepare for the GMAT?

As you will probably be aware of, most universities require you to take the GMAT (General Management Admissions Test) and it is an important part of applications at business schools around the world. Of course, no student clearly knows how much weight is allocated to GMAT scores relative to other parts of the application. My guess is that most universities have a "soft" rule in place: A good GMAT score will only look good if the rest of the application is up to par, too. If the overall application is bad, the GMAT won't rescue you. Similarly, if your GMAT score is not in a top quantile, that does not automatically debase your entire application.

This brings us to the first question: The GMAT score required to get into the leading business schools varies. Universities don't officially state the scores they'd like to see, but some of them post stats of the current class on their websites. These stats will often give the minimum and/or the average GMAT score of that particular class of students. This will give you a good idea of the competition you're up against. At top schools, you can expect to find average GMAT scores just above 700 for MBA programs and average scores above 750 for PhD programs. Therefore, my advice is: Shoot for that perfect score of 800 (which you won't get) and make sure that the minimum you will get on a bad day is 700. In fact, you don't have to be ultra-clever to get 700+. Just spend a lot of time on practicing the different problem types. There is a positive correlation between the time you invest and the GMAT score you end up with. Also keep in mind that the average GMAT scores quoted on universities' websites are just that. They're averages and hence there are many students in those programs with scores below that average. Keep calm and stay focused on your goal: A score above 700. But how do you actually get there? On to question two!

Personally, I did the GMAT twice and in the process found out what worked for me and what didn't. The GMAT is not complicated. Once you understand how it works, it becomes easy to score at least 650 even if you think your math is terrible. Most students perform well in the quantitative part and not quite as good in the verbal section. This may be due to the verbal questions being in English, which is not the first language of many GMAT test takers, but it also shows that a solid preparation will get you many points in the quant section of the GMAT.

When you first start learning for the GMAT, I can recommend The Official Guide for GMAT Review published by the test organizer, GMAC. While the book is not perfect, it is still the best GMAT preparation book I have found. It contains lots of official retired GMAT questions, so the practice questions you will find in the book will resemble those you're likely to encounter on the actual test. The book is organized in such a way that you first get some tips on how to solve certain question types, followed by practice questions in order of difficulty. Try to work through these parts of the book as quickly as possible, because they should only be the first step on your journey to your GMAT target score. The book provides some sound advice, but its true value lies in the practice questions at the end of each chapter. Make sure to answer all of them and to practice on a daily basis. When you get a question wrong, it is very important to understand what it is you did wrong. Just looking at the correct answer and then quickly moving on won't cut it if you're shooting for scores above 700. Personally, I got a great benefit out of writing difficult questions down on individual index cards, with a detailed, self-formulated answer on the back of the card. I ended up with a stack of maybe twenty hard questions that I had either gotten wrong more than once or which had taken me too long to solve. I went through those questions maybe twice a week until I was absolutely certain that I would get similar questions right in the future.

If you find that you have weaknesses in either the quant or the verbal section, I would recommend that you also look into the GMAT Quantitative Review and the GMAT Verbal Review. They contain lots of additional questions, so they're well worth the investment. One quick tip regarding the verbal section of the GMAT: Make sure not to neglect it! As I said before, many students find it harder to get a high score in the verbal section. This represents a great chance for you, because if you spend lots of time on practicing not just the quant questions but the verbal questions, too, you will find it easier to get into a high percentile in that particular part of the GMAT. The sentence correction questions, for instance, are easy to prepare for and great for improving your GMAT score!

Aside from the official books by GMAC I would not buy any other books, because they won't offer anything new. Instead, I have an invaluable free resource for you: GMATClub.com. It is a forum that is free to join and its members, many of whom have successfully cracked the GMAT, are extremely helpful. The best part is that the forum offers a never-ending supply of questions ranging from easy to very difficult. The closer I got to my test appointment, the more often I found myself checking out the forum. Also, if you need ideas for how to get to the correct answer more quickly, the forum members will certainly have some creative solutions for you that you might not have thought of.

In addition, I want to recommend ManhattanGMAT.com. This is the website of a test preparation company. I am not going to tell you to sign up for one of their online courses or to buy their books, which I have not tried myself, because I don't think you really have to. I would rather like to tell you about their online practice tests. The tests are structured like the real GMAT, so they will take roughly four hours to complete. Believe me, it is well worth putting in the time and effort. Advantages of the Manhattan GMAT tests are that they are similar to the real thing, they are good value for the money and the math questions are slightly more difficult than the actual GMAT questions. At least that is what most GMAT Club users and I have experienced. By the way, I'm not affiliated with or getting any money from Manhattan GMAT for recommending their online practice tests, so rest assured that I'm only telling you about them, because I found them very useful.

Finally, GMAC offers a free test preparation software, too. You can download two practice tests from the official GMAT website after registering for the test. I think it makes sense to do the first of the two tests early on. This way you will know what your strengths and weaknesses are, how good your time management is and you will get a first GMAT score. The great benefits of the official practice tests are that the questions are real questions from old tests and the score is likely to be more accurate than the scores calculated by third-party test providers, because only GMAC knows the magic GMAT test score formula. If you purchase the Manhattan GMAT tests and download the official practice tests, you will have a total of eight practice tests. This should be more than enough, but if you still need more, go through the GMATClub.com forum. There you will find additional links to test providers as well as download links to old versions of official GMAT practice tests. However, keep in mind that the actual GMAT scoring system and the question types have changed, so the scores you get on the old practice tests might not be a reliable indicator of what to expect from the actual test.

Imperial College MSc Student Blogs

As one might have been able to tell from the long-lasting silence on this blog, I have been very busy with my studies lately. The workload increased significantly compared to the introductory September courses. Usually we have between two and three assessed courseworks to complete in any given week, all the while trying to keep up with new material introduced in the lectures and revising past lectures for the exams coming up in two weeks. It may well be another three weeks until I will have the time to sit down and review the autumn trimester. I also received requests via email to write a bit about the application process at Imperial College Business School. I'm going to do this shortly.

In the meantime, I recommend prospective students take a look at Imperial's official MSc student blogs. The site features student bloggers from most programmes, including MSc Finance, Risk Management and Financial Engineering, Strategic Marketing, and International Health Management to name a few. If you're still undecided as to whether to apply for any of the business school's MSc programmes, don't hesitate to contact the current students with any questions you might have. I'm sure they will respond with useful advice.

MSc Finance September Term

The September term of the MSc Finance 2012-2013 programme at Imperial College came to a close last week with group coursework and individual tests in the introductory courses. I will therefore take the time to look back at the first month of studies and briefly summarise my impression of the business school so far. If you're thinking about applying to Imperial's MSc programme (applications will open again in November), the following might be a good description of what to expect from the first term.

Imperial College Business School

As written before, MSc Finance students at Imperial College Business School (ICBS) start at the end of August already, while the other business school programmes usually begin in October. This first month of studies is meant to serve as a refresher for those who have studied similar topics before or as an introduction into the field of finance for those having another undergraduate background, such as engineering. In addition, it allows the ICBS careers team to work exclusively with MSc Finance and MSc Risk Management students, which is important due to the early start of the bulge brackets "milk round".

There were four foundation courses: Business Valuation, Markets and Securities, Financial Modelling, and The Finance Industry:

Personally, I found Business Valuation the most interesting of the four, because I think it was of the greatest benefit to me. The lecture introduced the basic accounting and valuation techniques used for valuing a firm or project. Especially the accounting lectures were a good refresher for me and, most importantly, they were not purely theoretical. Instead of simply going through definitions and concepts, we walked through the calculation of free cash flows and the stock prices of different corporations using real financial statements and we looked at past examples of accounting fraud (e.g. WorldCom). While the discounted cash flow method, financial multiples et cetera were of course known to me already and fixed in my mind thanks to my undergraduate degree and internships, I realized that my knowledge of the different financial statements had become a bit rusty over the years. The course served its purpose and got me up to speed in this department again.

Markets and Securities covered many topics, including the basic functioning of the capital markets, financial instruments, pricing theory, diversification and the CAPM. None of these topics was discussed in detail, but again, this was a foundation course to get all students onto a similar level before the beginning of the second term in October. What I mean by this is that, even if you didn't study finance, economics or business administration for your undergraduate degree, you should not feel discouraged. You can still apply to Imperial's finance programme, if you're interested. The first four courses will give you a good foundation, so you won't be lost once the actual courses start. I should also note that the Markets and Securities lectures were accompanied by Matlab sessions where students could work on practical problems through the application of the theories taught in the lectures. Part of the assessment for Markets and Securities was a group coursework that required students to use Matlab for risk and return calculations. In the end there was an individual assessment in the form of multiple choice questions.

Financial Modelling dealt exclusively with statistics, predominantly discrete and continuous probability distributions. There was a weekly Matlab tutorial for this course as well. I would say that most students have had a good grasp of statistics before, but it is crucial to know the basics inside and outside in order to excel in the forthcoming more difficult lectures.

When I got my timetable for the first week, I did not know what to expect from The Finance Industry course at all. The title is just not specific enough. It turned out to be a course by Imperial's careers team supposed to give students an overview of the different roles and career paths within the industry. The course was on Thursdays and usually lasted from nine in the morning to seven or eight o'clock in the evening, but it was very valuable for many reasons. First of all, the careers team gave really good first tips on how to go about applying to employers in the financial sector in the City. This really opened my eyes, because the recruitment process in London is different from the process in Germany. There were also practical careers sessions where students could get feedback on their CVs and cover letters. In addition, industry practitioners and several bulge bracket banks gave presentations, which not only provided further insights into what certain jobs might require but also were good networking opportunities.

There were different assessments for all of these courses, including written group coursework, a group presentation and multiple choice tests. Working in groups has been a great experience for me, because you get to know your fellow students better and it is also interesting to work with people who have different backgrounds. This is actually one of the things I enjoy the most about being at Imperial: You meet new people every day and they all have different stories to tell. The diversity of students in terms of nationalities and cultures, work experience as well as academic and personal interests is amazing. This is not just enjoyable on a personal level, but working in diverse groups also prepares you for a job in the major financial centres of the world, where a global mindset and the ability to work in teams are highly valued.

Finally, I want to point out that the MSc Finance programme team has been very dedicated and helpful so far. They have been friendly and very helpful during the initial weeks, always communicating important deadlines and actively asking students whether they have any questions or need help. Taking into account how much students pay for participation in the programme, students should expect a certain service level. I think we have not been let down so far.

Today the autumn term commences. It consists of four compulsory core courses -- Corporate Finance, Investments and Portfolio Management, Mathematics for Finance and Financial Econometrics -- and they should be a lot more difficult than the foundation courses. I will write more about these lectures soon. In the meantime, if you're going to apply to Imperial College Business School and have any questions, please feel free to ask them here.

Imperial College MSc Finance Induction Day

Friday, 31st August was my first day at Imperial College Business School in London. The MSc Finance and MSc Risk Management and Financial Engineering programmes start one month earlier than the other programmes at the business school because of additional foundation courses and to allow students to begin working with the college's careers team on CVs and job applications. Apparently, it is advised to apply as early as possible for positions in the finance sector in the UK, even if you're still at the beginning of your postgraduate degree.

The greeting by the MSc Finance programme team and the business school staff was very friendly. As a welcome gift each student received a bag containing textbooks for the first term's lectures, a calculator and further information material. As pleasant as this was, it should be noted that the students of other ICBS programmes will be receiving iPads when they arrive on campus at the end of September. While getting books instead of a new tablet computer might sound like a bad deal at first, I understand the programme team's point that the textbooks should be more useful to us, especially considering the quantitative nature of most lectures.

Imperial College Queen's Tower, August 2012In addition to the mandatory introductory talks about the college itself, about the programme, IT-related issues and the library services, there were presentations by two of the business school's partners, CISI and the CFA Institute, both of which were more promotional than informative. Luckily, the team also organised a speed networking session for the students, which I found both entertaining and extremely useful in getting to know some of my fellow students. The induction was concluded by a campus tour and an informal drinks reception for all students. Imperial's main campus is located in South Kensington, just a short walk from Hyde Park and near some of London's finest museums, such as the Science Museum and the Natural History Museum. Although I've yet to explore most of it, I've already spotted some nice places to read and relax on campus, most notably the Queen's Tower.

Lectures will begin on Monday. In September we will only have four foundation courses, namely Markets and Securities, Financial Modelling, The Finance Industry (with careers sessions) and Business Valuation. But as said, students have been advised to begin planning their careers and possibly sending out applications already, so the first month's volume of lectures seems appropriate. After all, things should get really busy from October, leaving little time for career development.

Going to Imperial College Business School

Imperial College Stone Lions at Queen's TowerI will be studying for an MSc in Finance at Imperial College Business School (ICBS) in London from September 2012. Therefore, I'll be moving to London in a few days (now that the busiest part of the Olympics is over) and, in an effort to revitalise this blog, I'm going to write about both the programme itself and life in London. For example, the application process I went through at several universities almost one year ago was certainly challenging, so I'll be writing about that to give future students at European business schools an idea of what they might be up to, how to go about applying etc. Since the student body at Imperial is really diverse, life at the university should be quite interesting as well. I will therefore not only comment on the course contents, but also on the everyday goings-on at ICBS.

Hopefully, you'll find my reports useful or at least enjoy them. If there is anything in particular that you'd like to read about, please let me know.