Tag Archives: CFA Level two

How to avoid failing the level 2 CFA exam

Unfortunately, I am not writing this from the perspective of someone who passed the level 2 CFA exam on their first attempt. Recently, I got news that I failed level 2 (June 2009) and have decided to write down some tips for those who are considering attempting the level 2 CFA exam.

To explain how I approached the exam, I really begun studying with about 5 weeks to go and put in a solid 10-15 hours a week (my friends still recall missing me) until the last week when I put in around 35 hours. I watched each of the Schweser videos and made my own personal notes of most of the areas of the course (at least the parts that didn’t totally bore me to death – we’ll get to those later). I did not read the CFAI material or the Schweser notes. In total, I did all the CFAI practice exam questions and a few other select questions for a total of around 200 questions. Whilst I knew this was less than recommended, I was focusing on learning the information myself and hoping an understanding of it (rather than a drummed in repetition effect) would get me through.

This amounted to far less than the CFAI recommended 300+ hours but I thought I stood a somewhat decent chance of passing the exam with this amount of study regardless. This belief was based on my performance in level 1 with a similar amount of work. Additionally, I was learning the information because I was interested in it and found some sections of derivatives, portfolio management and alternative investments particularly hard to find the motivation to study – as they don’t particularly interest me. Though I did find the ICAPM model particularly humourous.

Obviously I was proven wrong; though narrowly. I performed well in the areas I was most interested in (equity valuation, financial statement analysis, and economics; average in ethics (a dart may have assisted me here) corporate finance and alternative investments; and poorly in derivatives, portfolio management and bonds. Of particular interest, my punt not to learn swaps particularly backfired. Bad punt.

The exam itself was difficult for me for two reasons. Firstly, I felt they left out alot of what I see to be the more useful ‘big’ parts of each different section (except those I mentioned that I didn’t focus on). Instead of these areas, they focused on details from the depths of the CFAI curriculum (this, I was obviously underprepared for).

Secondly, to an even greater extent than in level 1, the questions were particularly well written to confuse the living hell out of you. I have no issue with testing in this way as it obviously awards attention to detail. When thinking about several questions after the exam and comparing my response to those being discussed on analyst forum, I realised that i in fact had the correct answer figured out but was misled by the wording in the question to record a different answer. Hypothetical E.g. “Which of the following is not likely to be greater than the ROE of company A?” – here I would miss the “not” or do something stupid like that.

Overall, I feel very happy that I completed the level 2 CFA exam and learned alot from it. In particular, I enjoyed the debt vs equity financing material, the competitive forces material, the aggressive vs conservative accounting material (save the pension accounting), all the equity valuation material, the balance of payments, import / export and the foreign exchange material.

I may have another go at the exam but I feel I have got most of what I want out of the level 2 CFA material. Completing it would just allow me to do level 3 which I have heard is 50% portfolio management (not something i’m sure I could handle). As stated from the beginning of my CFA quest, the plan was to learn the information I wanted to and give myself a deadline, not lock myself in the portfolio delusion, i mean management, gaol. So we’ll see what happens next June.

In terms of tips for those completing the level 2 CFA exam:

  • The minute details matter, nothing is sacred. They are more than content to not test massive sections of the course and instead quiz you on the common name for a random bond that you’ll never have any contact with.
  • A very solid understanding of every section is required – don’t take punts by leaving out sections if you want to be sure to pass.
  • I imagine that lots of practice would have improved my chances (rather than just learning).
  • Do practice questions that involve word and syntax tricks under exam conditions.

CFA Level Two Exam – Strategy with 14 Days left

After completing the CFA level one exam last December, this is my first post about Level two of the CFA which I am taking on the 7th of June 2009. Click here to see my update 1 day before the exam about the CFAI sample and mock exams.

I have just finished my first run through of the material for the exam – 40 hours of videos, some audio tapes and a bit of reading here and there. I now have 14 days to revise it, practise it and somehow remember the increased amount of formulas required when compared to the level one exam (something i didn’t previously think possible).

At this stage, I feel very comfortable about my understanding of almost every concept in the course. There was very little that simply didn’t make sense to me when I went through each study session. Regardless of this, more so than in the level one exam, passing will require much more practise and memorisation of intricate formulas – something i unfortunately do not have alot of time for.

In terms of comparing level one and level two of the CFA exam, so far I have found level two to be:

  • Much more focused on understanding and applying concepts rather than rote learning or memorisation (although there is still a mountain to memorise),
  • A much more useful course in terms of valuing assets and understanding the impacts of the industry and the economy that a company operates in,
  • Much longer and more difficult to master. The question format change – 20 vignettes of information followed by 6 questions each rather than 240 individual multiple choice questions – means much more practice is required to succeed in the exam.

With 14 days left, I don’t rate my chances of passing above about 30-40%. Whilst I feel I understand the material, whether i can get it all to stick in 14 days and have it ready to assault the demands of time pressure, crazily confusing CFA questions, and exam day stress is another question.

That said, my approach to the next 14 days is below (or it will be once I’ve thought about it – which is why i am writing this):

Things that need to be done – My ideal preparation for the CFA level 2 exam

  • Revise all material using either the notes i made watching the videos or the secret sauce by Schweser. I will probably go for the later due to time pressure but I may do both if time permits.
  • Start doing some practice questions. It is far too late for this really but If i can do 1000+ questions spread well across the different areas, I will be happy. I should note here that i typically spend more time learning than doing practice questions and this usually works for me (who knows what will happen with level two though)
  • Do the 3 CFAI level two sample tests and the CFAI level two mock exam and then spend plenty of time revising answers and analysing weak spots (I used a spreadsheet for this is level one and it was particularly helpful in finding commonly tested item sets and in revising).
  • Go over weak areas and make a formula sheet / level two summary sheet. My version of this for level one was 2 pages in tiny writing.
  • Make sure I read a little about each area of the course every day. This is something i didn’t do for level one that i believe will help. Even if it is just a skim over the material, the repetition will help me.

Good luck to all others doing the course and I’ll write more about my experiences as I get closer to exam day.