Category Archives: CFA level II

4 Months Study Plan for CFA Level II

Please download 4 months study plan for CFA level II from here – 2017 CFA level II Study Plan

The study plan has been updated as per 2017 CFA level II curriculum.

Wish you all the best for your preparations. For any queries, please mail us at or call us at +91-8800946384.


Everything about CFA level II exam

Congratulations on passing CFA level I exam. You have crossed the first hurdle and now on your way to attaining CFA charter. The second hurdle, CFA level II exam, is relatively tougher hurdle than the CFA level I exam because of two reasons. First reason is that the curriculum of CFA level II is tougher than that of CFA level I and the competition among the more serious candidates being the second reason. Apart from that, this exam occurs only once a year. So, if you do not pass the exam, you have to wait for one more year which tests patience and many guys give up because of such a long wait. So, it becomes even more important to clear this exam in the first attempt. This exam contains two papers of 60 questions each. In CFA level I exam, we had 120 questions per paper but here that has been reduced to half. Do, the importance of every question increases by a factor of two. Few silly mistakes and carelessness in the exam can change the final result. So, one has to be extra cautious while attempting the papers. If this is your first attempt at CFA level II exam, then you must know few things before sitting for the actual exam.

• Few of you would have cleared level I by taking more than one attempt. But you must not think that you won’t be able to pass this exam in one attempt. Because this is a totally different animal and with a proper strategy, you can outsmart the competition and crack the exam with a focused 4-month preparation.

• The exam pattern will be the itemset based format. Each item set will have 6 questions. There will be 10 item sets in one paper of 3 hours and a total of 20 sets in morning and afternoon exam.

• The length of item set would be around 1-2 pages. There will be around 400-800 words to be read. Most of the item sets will have 1-3 exhibits with them. The exhibits will have some data and information which candidates have to use to answer the questions.

• The exam is not a reading comprehension exam. So, you should not worry about your reading comprehension skills. Questions will be direct and not inferential i.e. they will check the subject knowledge and not your comprehension skills.

• The weights of the subjects are not fixed as they were in CFA level I exam. They have provided a range for each subject. The ranges are 5-10%, 5-15%, 10-20%, 15-20% and 15-25%. The 5-10% range is for Economics and Quantitative Methods. You should rest assured that the weight of these subjects will be only 5% in the final exam i.e. only 1 item set based on these subjects. It has been the same for last 5 years. The 15-20% and 15-25% ranges are for Financial Reporting and Analysis and Equity Investments. In past years, they have asked 20% each from both of the topics. So, there is very less probability that they would change the weights. So, we can expect 4 item sets each from both Financial Reporting and Analysis and Equity Investments. (Note: Only 3 items sets were asked from Equity in 2016) Now the thing to be noticed is that these 4 item sets won’t be asked in one single paper. These will be spread over both the papers i.e. 2 item sets in morning and 2 in the afternoon. One can capitalize on that. Suppose there are 4 important areas in Financial Reporting and Analysis and they ask 2 item sets from 2 areas in the morning exam. Then, there are going to ask the rest 2 item sets from the remaining 2 important areas. So, you can revise the important concepts in the time gap between the two exams.

• Now the only remaining range is 5-15% which is for remaining 5 subjects – Corporate Finance, Alternative Investments, Derivatives, Fixed Income and Portfolio Management. Till June 2013 exam, the weights used to be 10% for Corporate Finance, Derivatives and Fixed Income and 5% for Alternative Investments and Portfolio Management. But in June 2013 exam, they changed the structure of weights. They asked 10% from Alternative Investments and 5% from Fixed Income in June 2013 CFA level II exam. These weights can again change in coming future. So, you need to concentrate equally well in these subjects and should not leave thinking that only 1 item set would come from the entire subject.

• The questions will be more calculation intensive than the CFA level I questions. So, you would be using calculator more in the exam. It is always better to get additional batteries for the calculator in the exam in case the calculator stops working. Even though the use of calculator would be more, most of the questions (more than 60%) would be still conceptual and theoretical. Ethics will be completely theoretical. For other subjects, out of 6 questions, you will most likely find 2 questions asking for calculations and rest questions will be conceptual.

• It is advisable that you attempt at least 2-3 full-length mock exams to make yourself comfortable with the pattern of the exam. You have to read a lot in the exam. So, you must have enough practice of doing that otherwise you could find time short for attempting all the questions.

• The one hour time between the exams can be utilized effectively. But it can work opposite as well as you can forget other things in a panic mode. So, revise the topics in between the exams only if you have already followed the same approach in your mock exams and got good results because of it.

Exam Preparation

How much time should I devote to preparation for CFA level II exam? CFA level II curriculum is more conceptual and relatively tougher than CFA level I curriculum. So, one should devote more time than the time devoted to CFA level I exam. However, it might be the case that in level I, you studied finance for the first time and took considerably longer time to understand the concepts. In that case, you would need less time for level II as you already know most of the basic stuff needed for the understanding. You should devote more time to problem-solving than just passive reading. Most of the learning will be by solving new questions. You might miss many important points while reading the content but those things will be cleared as you attempt more and more questions. It is always better to keep more time for the preparation as the exam occurs only once in a year and even in the second attempt, everything would look new again because of the gap between the exams. If you are planning to keep 300 hours for exam preparation, then out of those 300 hours at least 150 hours should be kept for problem-solving.

From where should I study – CFA curriculum books or third party content providers’ notes? The curriculum books are recommended. Level II exam is about valuation and you must need to understand everything in detail which could be best done by using the curriculum books. Not a single content provider is as comprehensive as curriculum books. The additional benefit of using curriculum books is that most of the problems in the curriculum books are in itemset based format which might not be the case with the third party content providers’ notes. However, you must understand that the curriculum books are going to take a good amount of time in revision as well. So, you must make your own notes or you can use third party content providers’ notes for revision. You may also do the subjects with more weight (Ethics, Financial Reporting and Analysis and Equity Investments) from curriculum books and rest of the subjects from third party content providers’ notes.

How many questions should I practice and from where should I attempt those? You should do as many questions as you can. Most of the concepts will get cleared only after solving the problems. Please make sure that the most of the questions are in item set format. You can find many item set format questions in the curriculum books. But still, those won’t be sufficient. So, we recommend that you get item set format questions from third party content providers or you can get those questions from previous mock exams given by the CFA Institute. CFA Institute provides only 1 mock test each year but you can always find previous mock exams on the great thing called the internet. You should attempt at least 300 item sets (1,800 questions) apart from solving individual questions to be perfectly prepared for the exam. You must also attempt at least 2-3 mock exams to make yourself familiar with the pattern and boost your confidence.

Free item set questions

You can practice free item set question from here.

Strategy for attempting item set questions

You can find many strategies to attempt item set questions from here.

How should I go about the preparation? Which subjects should be studied first and which should be studied later? You can either follow the pattern as given by the CFA Institute curriculum books or can make your own customized study plan. If you want to start lightly, you should start from Equity Investments and can follow it with other subjects like Financial Reporting and Analysis and Corporate Finance. Derivatives, Fixed Income, Quantitative Methods and Economics are relatively tougher in the level II curriculum. You can sandwich these topics between the other subjects and make your own customized schedule. But the main focus should be on three subjects – Equity Investments, Financial Reporting and Analysis and Ethics. These subjects have a total weight of 50% in the exam. These are very crucial subjects and luckily easier as well on a relative basis.

Ethical and Professional Standards (2 item sets: 1 in each paper – 10% – 15% weight)

The course of this subject includes everything you covered in your level I curriculum except the reading related to GIPS. There are few additional readings as well. These new readings are more important as compared to old readings from CFA level I. The most important reading is related to research objective standards. You can expect one item set from it. The other item set is expected to come from the seven standards. Given the importance of Ethics (Ethics adjustment) and its small course relative to other subjects, you must focus extensively on this subject and try to solve as many questions as possible. By solving more cases, you can maximize your score and can target a score of 10 out of 12 questions. The best practice questions are from the previous mock exams by CFA Institute. You can even solve Ethics from mock exams of level III for the common syllabus.

Quantitative Methods (1 item set: In one of the papers – 5-10% weight)

Quantitative Methods contains only 3 readings. The first reading is Correlation and Regression. The second reading is related to multiple regression and issues in regression. The last reading is related to time series analysis which most of the candidates find relatively tough. The second reading is the most important one and you are most likely to get the only item set from this reading or they can combine second reading with third reading and can ask 1-2 questions from third reading and rest from second reading. It is very difficult to get one full item set from the third reading. If you understand the second reading related to multiple regression and issues in regression, then you need not worry about the first reading as it is just a subset of the second reading. First reading is about linear regression with one independent variable. The most important area which can be tested in the exam is the issues in regression – heteroskedasticity, serial correlation and multicollinearity. If you know how to look at the ANOVA table and what all the variables in ANOVA table specify and the issues in regression, you are most likely to ace this subject. This subject looks tough but if understood clearly, you can revise this subject in 30 minutes and can score good marks.

Economics (1 item set: In one of the papers – 5-10% weight)

Economics has three readings. The last reading is a very small one regarding regulation and chances of getting the only item set from this reading are extremely small. However, you can get an odd question from this reading on that item set. The first and second readings are the important ones. The first reading deals with currency exchange rate determination and forecasting. It is a quite long reading and will take a good amount of time during first reading. Candidates tend to forget the small details and findings of this reading. So, it is a must that you prepare small notes and note down the important things and keep revising that stuff on a regular interval. The second reading is little bit quantitative in nature. It is about economic growth and investment decision. This is also very important reading. No topic can be considered less important. Candidates generally find it difficult to deal with economics in level II exam and generally ignore it given that its weight is most likely to be 5% only. But one should not ignore the entire subject and concentrate on the findings of the readings. Most probably the item set will be covering 2 readings out of 3 readings. So, you should not leave anything. But also do not spend too much time on understanding it. Just concentrate on the learning from the reading and move on to other subjects.

Financial Reporting and Analysis (4 item sets: 2 in each paper – 15-20% weight)

It has a total of 8 readings. First two readings discuss inventory and long-lived assets. These readings are almost similar to level 1 readings with a little more detailed version. You can easily master these readings with one reading. The next three readings are the most important ones and form the backbone of level II curriculum. These are related to inter-corporate investments, employee compensation, and multinational operations. You are most likely to find 3 item sets out of 4 from these 3 readings. Rest 1 item set can be asked from a combination of other readings. It is very important to absorb everything from these three readings and practice enough questions to gain mastery of these topics. It is highly advisable that you must read these three readings from the CFA curriculum books. The last two readings have been modified this year. These readings deal with financial reporting quality and the integration of financial statements. Some new stuff has been added into these readings this year. So, you must concentrate more on those newly added topics. There is one important thing which you guys must know. Whenever CFA Institute changes syllabus i.e. adds some additional readings or updates some already existing readings, then the probability of getting questions from those readings are higher than the other readings. Keeping this in mind, you can concentrate on the important areas.

Corporate Finance (2 item sets: 1 in each paper – 5-15% weight)

This subject contains 6 readings in total. The first 5 readings deal with capital budgeting, capital structure, dividends and share repurchase and two readings of corporate governance. These readings look exactly similar to the readings of corporate finance being covered in CFA level I. These are detailed versions of those topics. This subject looks easy but still many candidates fail to score good marks in it. The reason behind that is a lack of practice and complacency. One should concentrate on finer concepts while reading this subject. The last reading is about mergers and acquisitions and is one of the most important for the exam point of view. Most of the candidates enjoy reading it. You are most likely to get one item set from this reading and the other item set from rest of 5 readings. Focus on the blue box examples given in the curriculum book. You are most likely to find exact similar questions on the exam.

Equity (4 item sets: 2 in each paper – 20-25% weight)

This is the most important subject in level II curriculum. The chance of passing improves to a greater extent if one scores well in this subject. Scoring in this subject is also relatively easier than the other subjects as most of the readings are related to each other and have the same theme i.e. valuation. It has around 10 readings. Two of the readings have been adding recently – Your strategy needs a strategy & Industry and Company Analysis. Please spend more time on those readings. Apart from newly added readings, the most important reading is free cash flow valuation. Other chapters related to valuation like market-based, dividend, residual income, private company valuation are also important. The valuation from free cash flow involves decent knowledge of accounting statements like balance sheet, income statement and statement of cash flows. It is advisable that one go through this primer on financial statements before starting the topics related to valuation. One can expect 1-2 item sets based on free cash flow valuation and rest item sets from other valuation techniques. Practicing many item sets is the key to ace this subject. Your focus should be to minimize the silly mistakes. If you can minimize the silly mistakes, you could score as high as 90% in this topic. One can get the answer by following more than one path for cash flow valuation. It is always a better strategy to recheck the answer by working through uses of cash flows. It is less likely to find an item set from residual income chapter as the problem would become too lengthy for the exam. However, one can get theoretical conceptual questions from that reading. Private company valuation is also an important topic and you should get yourself familiar with the discounts of marketability and control and how they are actually applied. You are most likely to find 1-2 questions based on that.

Alternative Investments (1 or 2 item sets: 1 in each paper – 5-15% weight)

In CFA level I, we just touched the subject of alternative investments. In CFA level II, the topics have been explained in detail. It is always a fun to read this topic as it is very interesting. There are four readings in it. The first two readings deal with private and public real estate investments and are very important readings. It covers the real estate industry in detail. It is very important to understand every blue box example given in the book as you are most likely to find the similar questions on the exam. The third reading is about private equity valuation. This chapter covers the valuation of private equity and other things related to the PE industry. You should focus again on the blue box examples. Earlier they had asked 1 or 2 item sets from Alternative Investments but this time, you might find only 1 item set from it as the weight of Fixed Income has been increased this time.

Fixed Income (2 or 3 item sets: One in each of the papers – 10-20% weight)

There have been few changes in fixed income this year. The first change is obviously its weight in the exam. Earlier it used to be 5-15% and now it is 10-20%. Earlier they used to ask 1-2 item sets. But this time, you will get at least 2 item sets.  Few new concepts have been added in the third chapter related to key rate duration, one sided duration etc. The third chapter is the most important one and you are more likely to find one item set from it. The first 2 chapters are similar in a way and are quite easy to understand. The fourth chapter is related to credit models where you would find the most lengthy formulas. But you need to worry as they are not going to ask questions from those lengthy formulas. However, you may need to remember formula dealing with the reduced form model with constant volatility and constant loss-given-default. You must try to focus on the concepts behind the models like differences between structural models and reduced form models. Another important thing is the difference between expected loss and the present value of expected loss and what are the two factors (risk premium and time value) separating them. Your main focus in fixed income should be on chapter 1st, 3rd, and 4th.

Derivatives (2 item sets: One in each paper – 5-15% weight)

This subject contains 6 readings. The first 4 readings deal with 4 major derivative markets – forwards, futures, options, and swaps. These 4 readings are extremely important. Although the reading of options markets is the most important one but item set can be asked from any of the readings. You must concentrate on areas like swap valuation, option valuation using the binomial method, Greek letters and their importance for options, valuation of forward rate agreement and currency forwards and futures. The fifth reading deals with interest rate derivative instruments and covers topics like cap and floor. Once you master the topic of options, this reading would be a cakewalk. The last reading is regarding credit default swaps and has been added recently, thus requiring additional emphasis. As with most of the other subjects, the practice is the key for cracking this subject. The notation for forward rate agreement in the CFA curriculum book is little obscure but you can make your own notations which are easy to remember and work with. This is the subject if understood correctly can pay rich dividends. The candidates who are good at derivatives can target a score of 100% in the exam.

Portfolio Management (1 item set: In one of the papers – 5-15% weight)

There are 4 readings in this subject. The first reading deals with portfolio concepts and is almost the recap of level I syllabus. It is important reading but you will most likely find questions from the next two readings which have been added recently. These readings deal with information ratio and active management. These readings are very important and you will certainly enjoy reading them. Almost all the topics in the reading “Fundamental law of Active Management” are important and can be asked in the exam. The last reading covers the investment policy statement and the process of portfolio management. This is mostly theoretical reading and prepares you for the portfolio management topics for CFA level III where the weight of portfolio management is around 50%.

Passing Score

The minimum passing score (MPS) for level II depends on the toughness level of the paper. The CFA Institute tries its best to prepare average difficulty paper but sometimes paper can be relatively difficult and sometimes very easy. However, the MPS varies between 60-70%. If you score above 70% marks, you are safely above the passing score. Sometimes few topics could be very difficult to attempt but you must not lose your focus and try to get all the answer correct from the easier topics like Equity and Financial Reporting and Analysis.


The result will be announced after 6-8 weeks from the exam date and it will be announced on Tuesday. The pass percentage has been around 42% in recent few years. But you should not concentrate on pass percentage. Your focus should be on getting more than 70% marks in the exam. That will certainly cross you over the passing line. Please focus on the important areas (Equity, Financial Reporting and Analysis, and Ethics) and work out and execute your strategy. Practice more and more item set questions. Everything will be fine. Wish you all the best for the exam.

Download 4 months study plan for CFA level II from here – 4 months CFA level II study plan.

Konvexity Newsletter: March Edition

The March edition of Konvexity newsletter is out for both CFA level I and CFA level II.

CFA level I: The newsletter consists of  two comprehensive tests. Each test is of 90 minutes duration and consists of 60 questions. One test is on “Economics” and the other test is on “Equity”.

You can download the CFA level I newsletter from here.

CFA level II: The newsletter consists of two comprehensive tests. Each test is of 90 minutes duration and consists of 5 item sets. Each item set contains a total of 6 questions. One test is on “Financial Reporting and Analysis” and the other test is on “Fixed Income”.

You can download the CFA level II newsletter from here.

Konvexity Newsletter: February Edition

The February edition of Konvexity newsletter is out for both CFA level I and CFA level II.

CFA level I: The newsletter consists of one book review and two comprehensive tests. Each test is of 90 minutes duration and consists of 60 questions. One test is on “Financial Reporting and Analysis” and the other test is on “Portfolio Management and Derivatives”. The FRA test is based on first 6 readings of FRA till ‘Understanding Cash Flow Statements’. Rest readings will be tested in second FRA test.

You can download February CFA level I newsletter from here.

CFA level II: The newsletter consists of one book review and two comprehensive tests. Each test is of 90 minutes duration and consists of 5 item sets. Each item set contains a total of 6 questions. One test is on “Equity” and the other test is on “Alternative Investments and Economics”.

You can download February CFA level II newsletter from here.

How to attempt Item Sets in CFA exams?

The questions asked in CFA level I exam are stand alone questions where the candidate has to attempt one question at a go. It is a very simple format and candidates do not find it chilling. However, in CFA level II and CFA level III exams, it becomes little tricky as the questions are in item set format.

The question format (item set) can play a vital role between pass and fail. Most of the candidates are very comfortable with the individual question format and can easily score more than 80% in that format. However, if the same questions are given in item set format, the accuracy falls down to 60-65% level or may be even lower than that. Many candidates do not get enough practice of item set kind of questions and end up getting a band between 8 and 10. Those bands hurt a lot when you are so close and yet so far. I know few candidates who got a band of 9/10 in consecutive attempts even though they knew the syllabus inside out. They are generally not comfortable with the exam format.

So, it becomes very important to practice enough of item set kind of questions and to make a good strategy for attempting the item set. There are few basic strategies which you can follow but you need to practice enough to make a customized strategy for yourself. (Doesn’t this customized word always remind you of forward contract? Maybe I am drunk on curriculum books!)

Some important details about item set kind of format: Many candidates are worried about that if they get one question wrong, they might get all of other questions wrong in the item set. Haven’t you ever thought, what would happen if you get one data wrong and end up doing the entire item set wrong? For example, you mistakenly calculate the change in working capital in Equity and end up making all of your FCFF/FCFE calculation wrong and all questions might be based on that. If you fear that, then I have some good news for you. You need not worry about that. CFA exam makers understand that very well. Rest assured that by mistakenly calculating one thing wrong won’t have a huge impact as most of the questions are independent of each other. So, if you are using a prep provider where you are getting all the questions wrong because of one silly mistake, then that prep provider has not done justice with their content.

There is a high probability of getting at least 2 completely theoretical questions in an item set even if the item set is testing Quantitative Methods or Derivatives. It is a general myth that it is easy to score well in theoretical questions. The theoretical questions are generally conceptual and difficult to attempt successfully. Candidates generally tend to make silly mistakes in theoretical conceptual questions because the other wrong option looks almost correct especially for the subjects like Ethics and Corporate Finance.

Many candidates find it difficult to finish the paper in 3 hours. Let me tell you how the panic would set in last 30 minutes or so if you are not well prepared. If you have a habit of skipping question which you couldn’t get hold at in first go and come back to those questions at the later stage. This strategy works really well for the level I exam. But it can backfire in level II exam because when you come back to the question again, you might have to again read the entire item set. Suppose you skip 10-12 questions from 5-6 item sets and last 30 minutes are left. It can lead to a panic button at this stage. But there will always be some questions where you won’t be sure. What to do with those questions? Is there some way out? Well, that depends on from subject to subject. The pressure makes Manchester United to score consistently in last few minutes of the game and the same pressure makes the South African Cricket teams to choke and to snatch defeat from the jaws of victory. However, the best way to deal with it is to practice so much so that you have enough time left (around an hour) for those few remaining questions.

Let’s discuss few of the strategies which have been used by many candidates in the past with mixed results. One of these strategies (may be in tweaked form) can be effective for you as well.

The Genius Strategy: Well, some guys are the genius kind. They are so comfortable with the curriculum that they happen to solve the entire paper in 2 hours and generally end up scoring more than 70% marks in 8-10 subjects. If you are that kind of person, then it is advisable that you recheck your calculations again not at the end of the exam, but after solving each item set. That would save a considerable amount of time and effort in the end. You can skip doing that in between as well if you are going slowly on the exam. It is also advisable that you attempt your weak areas (if there are any) in the middle when the concentration tends to be maximum. Leaving the weaker areas for the end would not do any good.

The Conformer Strategy: This is the most basic strategy which is generally used by the people who haven’t tried any other strategy to solve the exam. But still for few candidates, this could be the ideal strategy. Simply read the complete item set, underline the important points (where there is a possibility of a trap), then, attempt each question one by one. This strategy is ideal for guys who have a good reading comprehension capability and can read at a faster rate. A CFA item set would have around 400-500 words and on an average two Exhibits with some data. A guy with a good reading speed can finish the reading part in 3-4 minutes and comprehend that as well. Now, each question can be given 2 minutes. Attacking and solving the topics in which you are comfortable in the beginning is a good way to execute this strategy. If you can solve 5 item sets in 60-75 minutes, there is nothing like that. This strategy can lead to pa panic button at the end of the exam. So, it is very important to write the details about the question when you plan to skip any. For example, you plan to skip a question on calculation of percentage of active portfolio in an optimal portfolio in Portfolio Management (Please don’t ask me whether this could come in the exam or not. If anything is given in the CFA curriculum books and they have not explicitly mentioned that it will not come, that part can come in the exam), then you can write in the exam that for solving that question, you would need to read this paragraph only or this Exhibit so that when you come back later, you don’t end up wasting a good amount of time in solving that question.

The Cheater Strategy: Few of you might not have cheated in the exams. So, let me explain to you what this strategy is all about. The cheater here doesn’t mean that the person doesn’t know anything and is entirely dependent on the other guy’s answer sheet. The cheater here refers to people who have the brain which if shown some important word (clues) or phrase, can remember everything related to it. So, by looking at few words, the cheater can remember most of the things and can write that in the exam. Now, this is not a subjective exam. But it is important to use this strategy in the objective exam as well. They have such brains that if they get few key words in their mind, their mind can subconsciously work on the answer. For that to occur they need to give a look to the questions in the item set in one go and it should not take more than 30 seconds. There will be few key words which will click in their mind and that would make all the difference. While reading through the item set, their mind will be hunting for the answers for those questions subconsciously and they would be in far better condition when they come back to solving the questions.

Backward Induction Strategy: Don’t shoot me if this reminds you of valuing interest rate options using the Binomial method. But that’s how it works for most of the fellows. They tend to concentrate more when they are aware of the questions. Many successful candidates have executed this strategy. Read the questions carefully before reading the item set. Then go back to the item set and as soon as you get the answer for any question, just mark the answer and keep on reading. There are many ways to execute this. So, it requires a lot of tweaking.

One way is to read few of the questions which you can retain rather than reading all the questions. For some candidates, this is the optimal strategy (Yes guys, even here also we need to find the optimal strategy with the highest Sharpe ratio). Another way can be to read the numerical related questions only or non-numerical questions only and then try reading the item set. Some strategy involves even reading of options as well apart from reading questions especially in the case of subjects like Ethics where the options are more important than the questions.

Wheat and Chaff Strategy: Some guys have developed a good habit of acquiring the gist of anything by just looking at it. Some guys are good with numbers and they can run through the entire item set by looking at the numbers only and catching the important details from Exhibit and other such things. These guys have a habit to quickly run through the 400-500 words item set in 1-1.5 minutes. Then, they can start attacking questions and giving more time to questions rather than reading the item set. Some guys are the master at that. For them, the item set behaves like a single individual question.

This strategy can be developed with enough practice. Once you have practiced enough, you tend to know that what would be running in the examiner’s mind while setting the item set. And then you need not read the redundant part and just read the part which is necessary for solving the questions. If you can separate the chaff from the wheat, it could lead to lots of time saving. And that saved time can be applied in your weaker areas.

Mixed Strategy: It is not necessary to apply the same strategy for every subject. One can have a different strategy from the above for different subjects. For example, one can go with Wheat and Chaff strategy for subjects like Quantitative Methods and Equity Investments and Backward Induction Strategy for subjects like Ethics and Economics.

To find an optimal strategy for yourself, you need to practice enough item sets. And the best thing with that practice is that it would further improve your chances of passing the exam. The best item sets can be found in the curriculum books, current year mock exam, and previous years’ mock exams. Try to finish those first before moving to any other prep provider material. You can refer to this for free practice of item set questions. I hope you guys can find a way to maximize your score in the exam and you do not have to painfully wait for 2 months (like the borderline candidates do). I hope that after attempting the exam, you are dead sure of clearing the exam. I wish all the best for your preparations. Stay focused.


Free CFA level II Item Sets

You can download the item sets in pdf form and newsletters from here. Please do not attempt fixed income questions as the syllabus has been changed this time. Rest all subjects can be attempted.

January newsletter contains two comprehensive test of 1.5 hours each on Derivatives and Corporate Finance.

February newsletter contains two comprehensive test of 1.5 hours each on Equity and Alternative Investments & Economics.

March newsletter contains two comprehensive test of 1.5 hours each on Financial Reporting & Analysis and Fixed Income.

Wish you all the best.

How to finish CFA curriculum in 2 months?

80 days are left for June CFA exam. Most of us would have finished around 50% of the curriculum so far. However, there will still be plenty of souls who haven’t got adequate time to devote for the exam preparations. Some guys even wouldn’t have opened their books and they are waiting for some miracle to happen so that they can start their studies. They definitely want to start the studies but they are better in excuse making. That’s why they keep making excuses for themselves.  With each excuse, they are building pressure on themselves and now they are afraid of even starting. This post is dedicated to those guys who haven’t started yet and are in a dilemma whether they would be able to do that or not.

It is very important to finish the first reading of the curriculum at least 20 days before the exam so that we can sufficient time for practicing mock exams. So we have only 60 days left. Many of you must be contemplating whether to defer the exam or give it a try. Just remember that half-hearted effort is most likely to end in failure and utter disappointment.

People are so afraid of failure. So afraid that they quit before they started. But you guys have do understand it’s not about failing. It’s about raising each and every time you did. Nobody I repeat nobody you know from television or books who is successful is fail-free. In fact those are the people that failed a lot. Because they never gave up. Because they always focused on what their goals were. Success doesn’t come overnight. It comes from hard work and dedication every single day. Nights. You don’t prosper from day one to day two. It takes weeks, sometimes decades. Your goal, no matter how high it may be, is reachable for everybody the only question is how much time and energy are you willing to spend. What are your priorities. If priority number one is and has been the thing you want to accomplish you will don’t worry about that.

The answer to your question whether it could be done in 2 months is a big YES. It can be done and many people have done it in past. All you need is right strategy and focused approach. Just remove all the doubts from your mind. Think of the greatest thing ever done by you so far. Compare that to this and you will find all the motivation to give it a try. The hardest thing is to start but once you are set, everything will fall into place. Don’t listen to any person who belittles your ambitions. An enemy is better than a friend who keeps on belittling your ambitions and wants your company in failure.

Don’t ever let somebody tell you that you can’t do something. Not even yourself (your own mind sometimes acts as a limiting factor. Break those limits). People can’t do something themselves. They want to tell you that you can’t do it. If you want something. Go get it. Period.

Strategy for CFA level I: 60 days – 67 reading. Maximum weight areas are FRA (Financial Reporting and Analysis) and Ethics. These two subjects constitute 35% of the exam. FRA has 14 readings. But first 3 and last 3 readings can be done in 2 days and are not that important for the exam point of view. The middle 8 readings are the crux. Each reading can be easily done in a day with proper practice. It will take 5-6 hours to read and solve the practice questions provided at the back of the chapter. Keep noting important formulas in a separate notepad. It will help you a lot during revision and will reduce your revision time by more than 50%. FRA needs 10 days. Either you can start with Quantitative Methods or you can start with FRA. It will depend on your background. If you are from a non-mathematical background, try starting it from FRA as Quant can consume a lot of time. You can break your FRA in two halves. In the first 5 days, read first 7 readings and last 7 readings in other 5 days (may be during the later stage of your preparation so that you do not forget anything about FRA).

After FRA, the basics of quant should be done which involves the present value of money and discounted cash flow (NPV and IRR). With these two readings, you can finish the 6 readings of Corporate Finance as well. These 8 readings could easily be done in 5 days. For Ethics, you can set 1 hour daily and finish it along with all the other subjects. By doing this you will be having enough of a practice of Ethics questions which will help you a lot in the end.

Quantitative Methods and Fixed Income has a weight of 11.66% each in the final exam. Economics and Equity have 10% weight each. After doing half of FRA, Quant basics, and Corporate Finance, you can attack Equity or Fixed Income. Equity is small and mostly theoretical and can be easily finished in 5 days. Fixed Income is little lengthy and it would take 7 days of yours. Do not forget to practice enough questions. After these subjects, move on to rest of the Quantitative Methods and Derivatives. These two subjects can be finished easily in 6 days and 4 days each considering you are devoting 5-6 hours daily. Now try doing Economics. Economics is too lengthy for its 10% weight. Selective reading would be good or try studying it from some prep provider so that you can read the concise version of it. Do not devote more than 8 days to it. Now 40 days are over and you are left with half of FRA, Portfolio Management, and Alternative Investments. You can easily do rest of the FRA in 5 days. Portfolio Management has 4 readings out of which 2 are very small. It won’t take more than 3 days and AI can be done in 1 single day. So, you can easily finish it off in 49 days. Rest 11 days can be devoted to your weak areas, practicing more questions and reading Ethics again.

Last 20 days should be spent on 2 revisions. First revision will take 10 days and the second will take 3-4 days. Try to attempt at least 4-5 mocks before the main exam. Once you’re done with it, the chances of success will improve a lot. It is that simple. 5-6 hours a day for other subjects. 1 hour daily for Ethics. Total of 6-7 hours daily for next 80 days and you are through. Now don’t give another excuse that you have an office to attend. 6-7 hours daily makes 45 hours for a week. If you can study 12 hours on weekends, then you need to study only 4 hours on weekdays which is manageable. You have to do it no matter whatever it takes it to do.

You can download the study plan for CFA level I from here.

Strategy for CFA level II: 60 days – 56 readings. Equity and FRA have the highest weight and they are the easiest of all the subjects with Corporate Finance as one exception. The good thing is that you can start from any topic as almost every subject builds on from the material you studied in level I curriculum.

Equity has 8 reading and first 3 readings are very small and can be finished in one single day. Rest 5 readings can be finished in 6 days assuming 2 days for the most important reading i.e. Free Cash Flow Valuation. FRA has a total of 8 readings. Last 3 reading can be done in 2 days and first 2 readings in 2 0days. The most important readings are Readings 19, 20 and 21. There is 90% chances that you will get at least one item set from each of those 3 readings. Master those three readings in 5 days. Practice enough of item sets questions provided at the end of the curriculum books.

These two subjects constitute 40% of the exam. Keep on revising them. Note all the important formulas and results on a sheet of paper and spend at least 30 minutes daily in revising those. These will take 16 days of yours. After these two subjects, Derivatives, Corporate Finance, Ethics, and Fixed Income have 10% weight each. Derivatives (6 readings) can be finished in 8 days. Corporate Finance (5 readings) can be finished in 5 days. Ethics (10 readings) can be finished in 5 days. (Spend more time on the new reading for level II which were not there in level I) Fixed Income (6 readings) can be finished in 8 days. You still have 18 days left for rest 4 subjects which have a weight of 5% each in the main exam. Quantitative Methods (3) readings can be done in 3 days. Economics (3 readings) is the simplest of all once you have understood derivatives) and can be easily finished in 3 days. Alternative Investments (4 readings) can be done in 3 days. Portfolio Management (3 readings) can be finished in 3 days. So, everything would be over in 54 days. Practice is the main thing after that. Practice lots of questions and spend lots of time on the 6 topics which have 80% of the total weight.

You can go through this article for a detailed strategy to finish CFA level II curriculum in 2 months.

Strategy for CFA level III: 60 days – 43 readings. This is the toughest level of all and if you are from an accounting background, you will find it relatively tougher to crack as there is no weight given to accounting subject in level III. It is also different from the level I and level II and it has one subjective exam as well. The best strategy to crack the exam is to go through the previous years’ mock exams. The questions in the exam will be almost similar to the questions provided in the mock exams. Once you can master those questions, no one can fail you in the subjective test.

30% of the subjective paper will come from the Portfolio Management – Individual and around 20% will come from the Portfolio Management – Institutional. So, you know which areas you need to master. Devote enough time on those 2 topics as you will find 10% more of those in the objective paper. Those two areas can be mastered in 15 days. Read them slowly and practice the questions by writing on a sheet of paper. That will make a lot of good to your confidence. Once you are done with these two areas, rest is easy and fun to read.

The first book and the last book that are related to Ethics and GIPS respectively, generally comes in the objective paper only and constitute 30% of the objective test. GIPS is too lengthy and weight is also less. So, spend the time accordingly. By looking at the previous mocks, you will have a good idea what all things you need to study carefully. One should not spend more than 8 days in these two readings.

Rest all of the readings concerning with portfolio management, equity, derivatives, economics and fixed income are fun to read. You will learn a lot in those readings and if you have mastered the concepts in level II, you can finish all of those readings very quickly. If you are weak in your concepts, try to study them carefully and assimilate all the learning. The subjective exam will be highly conceptual unlike level I and level II. So, proper understanding is very important. All of these readings can easily be done in 35-40 days if you can spend 5-6 hours on a daily basis.

You can go through this article for a detailed strategy to complete curriculum for CFA level III exam in 2 months.

If you haven’t registered for the exam yet, tomorrow is the last day for registration for the June exam. Do register for the exam and give it a go. Start the preparation from today itself. everything would be fine in next 60 days.

If you wanna start then start now “I’ll start tomorrow” is a lie!! And you know that. No excuses anymore, no tomorrow anymore. There’s no tomorrow. There’s only today.

So, start today. Open up your books. You have neglected them for such a long time. But they never said any words to you. They are not angry with you. They are waiting for you like a lover. Go on and fall in love with them.

Also, remember that pain is temporary and pride is forever. All the best. Success will be yours.


A blog of the NYU Colloquium on Market Institutions and the Leipzig Colloquium on the Market Order

Fundoo Professor

Thoughts of a teacher & practitioner of value investing and behavioral economics