The Level II CFA exam can be challenging and overwhelming. Therefore it’s essential to make a plan that’s both realistic and effective. In order to master the material covered in Level II, you need to have a very disciplined approach. Keep in mind - You don’t want to fail this exam which is held only once a year. Here are five tips for planning your exam preparation better.
1. Give importance to the highest weight topics
In Level II, the topics with the highest weight are equity valuation and financial reporting analysis. For FRA, you can expect at least four to five item sets with the important concepts being accounting (leases, acquisitions, inventories and long lived assets), inter-corporate investments, variable interest entities and financial reporting quality. These concepts can either be asked individually or as a combination. Alongwith, you must also thoroughly learn the principles and processes with their application.
Equity Valuation will also have four to five item set questions. Take note that this section lays a lot of emphasis on formulas and you may be asked to perform formula-based calculations and interpretations.
2. Prepare according to the exam format
The Level II exam is going to be in the form of item sets. Each item set will include a set of six related questions preceded by a short story or an essay and each item set is going to be from a different topic area. The short story would be from a page to a page and a half.
Remember that the exam could also include an integration of different topics. So for example, you have a question from equity valuation, and within that same item set, a question could be there related to dividend discount models or price multiples.
3. Focus is on testing your analytical knowledge
The Level II format gives you a lot of extra information to evaluate your analytical skill, the ability to parse through irrelevant information. Memorization isnt going to be helpful as the previous level as you'll see questions directly from the course content. The aim is to assess your ability to be an effective analyst. Hence, does your answer reflect that you have understood the concept indepth and can think beyond what’s on the surface?
4. Find your most effective method to learn
The method of underlining and highlighting has become so monotonous that it fails to help in retention of the content. Based on research, we have found two ways that will help you learn better:
1. Interrogation Questions such as, “Why does this make sense?”. While doing valuation of a stock using a specific model, question yourself as to whether this makes sense? Your ability to search for a deeper answer or understanding will help you make analytical answers.
2. Test yourself repeatedly. Taking quizzes and doing problems, is known to be extremely effective as making a mistake has a stronger learning impact than getting an answer right. Making a mistake causes your brain to flare up and kind of train you to ensure that you don't repeat the mistake.
5. Don't delay, Start Early
When candidates are asked about the most difficult level in the CFA journey, the most common answer is Level II. Come April, May when the stress level starts ratcheting up. 300 hours of study is the minimum number of hours recommended by the CFA Institute. You need to put in time and effort every week in order to cover the required hours over the months. Starting late and cramming everything in the last few months is a recipe for failure.
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