Topic wise tips for CFA Level -2 preparation Featured

Topic wise tips for CFA Level -2 preparation Topic wise tips for CFA Level -2 preparation

CFA_Level2The CFA level 2 examination is considered as the toughest level in the CFA certification. CFA level 2 is trickier and also there is a change in exam pattern compared to level 1. GyanCentral catches up with expert CFA mentor Aditya Ahluwalia to know the nuances of preparation.

What kind of preparation is required for level -2 & how is it different from the preparations of level-1?

Level 2 exams are almost four times as difficult as the level-1 exam. This is so because of the nature of curriculum and the volume. Level-2 is twice conceptually tougher than level-1; also there's twice as much competition. Therefore more practice and efforts has to be put in level-2. It is more theoretical and evaluation based, this level warrants thorough reading n practicing many more questions than in level 1. Clarity of concepts is a must and can be honed by regular practicing.

Level-2 has Item set questions unlike the MCQ's in Level-1, what is the tact to prepare for them?

Item set is the major difference in level-2 Exam. Item set is nothing but a story or paragraph which has item specific questions. In the exam paper a large chunk of redundant information is skillfully added to confuse the students, with regular practice candidates can learn to sift the required information from the redundant ones. It is advisable to read the questions of the item-set before you begin to read the passage/item this might give a better understanding as to which information is more useful. Practice and confidence are essential in solving Item-set questions.

Does reading speed matter?

No, reading speed is not a concern. It is not a MBA entrance exam, in CFA exams student need not race against time but the students should time themselves accordingly. In a 3 hours long paper it is advisable to complete 30-40% of the paper in first one hour, in the 2nd hour try to complete 40% or so leaving with 20% of the paper to be completed in the last hour.

Preparation for Quantitative methods:

Quant is tougher at this level than the L-1.Focus at this level should be on conceptual understanding and remembering the formulas. Quant accounts relatively small volume for the exam, so I suggest give it a read initially, in case of difficulty practice and redo till perfection. It is tough but not a heavy weight on the exams and can be cracked with ease after practice.

Preparation for Economics:

Economics is not a heavy weight. The strategy followed at level-1 can be continued. Economics delves into currency and GDP and similar topics. Also the subject can make up quite an interesting read since it adds to our wealth of knowledge about the day-day life. Focus on solving currency questions, direct & indirect quotation otherwise the questions designed can lead to confusion.

Preparations for Financial reporting analysis:

It is a heavy weight subject and also a tough subject to crack. Devote good time in studying both theory and practice. Work on the weak areas and strengthen them, students cannot get away with the weak areas in this topic as they can in economics and quant. Also it is the last level in which students will study topic.

Preparations for Corporate finance:

This is another heavy weight subject and very scoring. It is an interesting topic, not difficult to understand. The basic concepts learnt in L-1 remains same. Students can use this subject to maximize their score. Students should focus on scoring well in this paper.

Preparation for Equity investment:

It is the heaviest weight subject in the exam. It is similar to corporate finance. A good bunch of new concepts have been added, for instance private company valuation, advanced reasoning behind the earnings, multiple and absolute valuations techniques. Reading and practicing being quick on calculator can help immensely.

Preparation for Fixed Income:

This subject is difficult, Level-1 introduces basic concepts but level-2 is tough. L-2 is replete with advanced concepts like, 'mortgaged packed securities', 'valuations' and alike. The problem for this subject is that the curriculum notes are not well presented so it is advisable to take help in-case of a doubt arises in understanding any concept.

Preparation for Derivatives:

Derivative is a scoring subject given it is numerical. Level-2 introduces far more advanced concepts regarding structures and valuation methods. My advice is to Hit the things from basic, invest time, practice regularly to firm up your concepts and get the hang of the subject in order to limit the chances of going wrong and loosing marks.

Preparations for Alternate investment:

It is a small weight on the total exam. This subject is not greatly advanced from L-1. The strategy used for level-1 can be followed for level-2 as well.

Preparations for Portfolio Management:

Portfolio Management is an interesting subject. Nothing vastly different from level-1 is introduced, another heavy weight subject. Importantly this subject accounts a huge percentage in Level-3 so it is extremely important for students to study this subject well at this level and get their concepts straight, since this will form their base for Level-3 exams.

Preparations for Ethics

This is one paper which is consistently a heavy weight across the three levels of CFA. Its solutions are only practice, get hold of a good quality question bank and practice as much as possible to master the subject.

Often students complain that CFA notes are not adequate, can you please suggest an alternate source.

CFA exams are over 60 years old. Owing to this many service provider in market provide good CFA notes. My advice is follow any source the student is comfortable with but be careful in terms of the selection of the question bank and mock test set; It this which makes difference between passing and not passing

Please give your advice on Time Management

If a student is taking coaching then they need to invest bare minimum 1 hour everyday studying; if they are not attending coaching class then 3-4 hours daily is required. For a working professional, joining a good coaching over the weekend is advisable since it will substantially reduce the time invested in learning and improve understanding of what important concepts need to be studied from examination point of view. If a student doesn't take coaching then the wisest way is to concentrate more on heavy weight topics, getting concepts right & then move onto studying the light weight subjects.

How feasible is a CFA level-2 degree in job market?

In my opinion, CFA proves to be great boost for an individual's career. If a student has cracked CFA Level-2 it adds to his qualification. Further Level-2 is more difficult to crack than Level-1, so if I came across a resume of a candidate who has passed level-2 there's a high probability I would call for him for an interview. Thus it improves job prospects immensely.

Advice for the level -2 aspirants?

A good number of students pass the Level-1 with spare amount of understanding of the concepts and efforts, this approach will not yield any results at Level-2. My advice is at this level put in serious efforts, give time in understanding the concepts & give the exam the attention it warrants. Students should focus on giving their 100%.

Students preparing for the CFA - Level 1 June 2012 can follow the CFA Level 1 article for more tips.


The author, Aditya Ahluwalia is a lead instructor at Finstructor, Mumbai. He has cleared all levels of the CFA and FRM exams with top sectional performance across levels. Aditya is a computer engineering graduate from Punjab Engineering College, Chandigarh. He has subsequently completed his MBA from the Faculty of Management Studies (FMS), University of Delhi. Aditya currently works in the Indian equity markets as a part of the portfolio management team of one of the largest domestic fund houses. He brings with him invaluable experience from the fields of fund management, equity valuation, portfolio management, risk management, quantitative analysis and behavioral finance. Aditya has over 2000 hours of teaching experience to his credit. He has been actively conducting training classes for the CFA and FRM programs for over 3 years.

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Last modified on Tuesday, 10 July 2012 17:58