Congrats on passing the CFA Level 1 but do not be under the impression that you can take up where you let off for Level 2. The second part is a major step up in the level of difficulty and not getting this fact ingrained in the mind is often a major cause of downfall for Level 2 candidates.
Remember this when you start preparing for Level 2. There is a massive volume of course materials to cover and hence it is advisable to start studying as early if possible. Many students even start prep before Level 1 results are declared.
When creating a plan for studying for the CFA Level 2, you have to consider the study hours and the topic weight, the latter giving an idea of the subjects to focus on. Surprising as it may seem, you have to consider the strengths and weaknesses of your Level 1 subjects as many concepts that form the base of Level 2 are grounded in Level 1. This is why several prep courses for Level 2 provide a refresher booklet for Level 1. If you do not get one, use the condensed version of your Level 1 notes to get a head start on certain subjects for Level 2.
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How Studying for CFA Level 2 Differs from Level 1
Your study plan that was created for Level 1 will not hold good for Level 2. This is because the structure of the Level 2 exam is quite different from the one you have completed and hence, a new study strategy for Level 2 has to be in place if you want to crack the exam.
Let us examine the major differences you will encounter while studying for Level 2 over what you have gone through in Level 1.
- Use of vignettes: At Level 1 you have been used to self-contained question stem. In level 2, you have to change the study style to tackle vignettes or mini-cases. A vignette is a case study consisting of several paragraphs with text, tables, financial statements, and more. You must develop the ability to scan this data and select the critical pieces needed to answer a question.
- Item-set question format: The 180 questions of Level 1 are unrelated to each other. Level 2 questions are categorized into “item sets”, each based on a vignette with 4 to 6 multiple-choice questions on a single topic. Hence, unlike Level 1, it is potentially risky to skip a specific reading in Level 2 as each item set represents 5% of the exam points. You cannot afford to leave out any topic in Level 2.
- No advantage from previous studies: Most Level 1 exam candidates have at least an undergraduate degree with a specialization in business or a related subject. Hence, they start with an already existing understanding of the concepts. The pressure to learn new things is not so high. This advantage runs out in Level 2 and you have to study new topics quite in-depth and extensively.
- Less Memorization: A significant part of your Level 1 studies involved rote recall of formulas and definitions. Level 2 de-emphasizes memorization and focuses on your ability to apply relationships and tools to analyze financial data. Another area of testing in Level 2 is how well you can link a theory or concept to another.
- More complex exam material: In Level 1, studies were a straightforward introduction to the subjects. The Level 2 curriculum, on the other hand, contains various complex concepts that require intensive studies before they can be understood. Topics like swap valuation, CDS valuation, binomial options valuation, and Black–Scholes–Merton, can be mind-boggling.
These are just the major ones and there are other points of difference too. Studying the curriculum for CFA Level II is altogether at variance with Level 1.
Best Study Plan for the CFA Level 2
The time taken to prepare well for the CFA exam Level 2 by an average candidate is around 6 months. However, this statistic is dependent on several factors such as the academic and professional background of the candidate, prep materials at disposal, and the time before the exam. But the main pillar of studying the curriculum for CFA Level II is practice and still more practice. You have to solve multiple practice questions and take several mock exams as a part of the best study plan for the CFA Level 2.
In keeping with the study plan, how to start studying for CFA Level 2?
Here are some tips to create the perfect study plan and the factors to consider.
- Keep adequate time: Level 2 is harder than Level 1 as the curriculum goes into great depth and intensity. Moreover, it will take some time to get used to the vignette-type questions. As a rule of thumb, you should keep 328 hours in your study plan to prepare for the Level 2 exam though targeting 350 hours of study time is always preferable. These increased study hours will not only help you to hone the new exam technique but will enable you to absorb vast amounts of study materials. This should answer the question of how many hours should you study for Level 2 of the CFA program
- Check if your study plan works: Working out a study plan is not rocket science but knowing whether it works for you is not easy. If you have a demanding full-time job, target 2 hours per day of study time on weekdays and 5 hours per day over the weekends. If you can carve out 20 hours per week consistently by rearranging work-life commitments, you should have a workable study plan.
- Optimize the use of study materials: Given that you have about 3 months of study time – leave out a month for practice and revision – it is unlikely that you can get through the books of the CFA Institute alone. Rather, take up a good prep course from a reputed provider and keep the Institute books as a reference. Prep courses will guide you through the full curriculum within the 325 hour of time frame by focusing on your weaknesses and leaving out the areas of strength.
- Crank up the pace slowly: When you get your study materials, do not start at a high pace. The aim is to get started after the long layoff between Levels 1 and 2, even if it is just one page at a time. Then slowly increase the study intensity as you go along, being careful to ensure that your study plan targets that you have set are met.
While designing your study plan, keep these aspects in mind to sail through the level 2 exams.
When to Start Studying for CFA Level 2
The main downfall of candidates appearing for Level 2 is assuming that they will crack the exam just as easily as they did in Level 1. They fail to realize that Level 2 is a big step up in difficulty over Level 1. And when they do, they have already gone forward somewhat with their preparations at a slow rate.
Level 2 has huge volumes of materials to cover and the structure of the exam is different from Level 1. This will take some time to get used to. To take these two aspects in your stride, start studying earlier. The ideal period that should be allotted is about 6 to 9 months before the date of the exam to be able to crush Level 2 on the first attempt.
Again, when to start studying for Level 2 CFA depends a lot on your weak areas that require extensive studies. If one of them is a topic that is heavily weighted in Level 2, you will need extra time to bring your knowledge base up to par to improve your scores and the chances of passing. All these are critical factors to determine when to start studying for CFA Level 2.
Studying for Next Year’s CFA Level 2
It makes sense to study Level 2 over a year in advance, even before the result of Level 1 is declared. You might wonder why should you waste your time on Level 2 if you might have to go back to preparing for Level 1 again if you fail to make the cut.
The reason is that some concepts that form the core of Level 2 are grounded in Level 1. Hence if you start studying for next year’s CFA level 2, not only do you get a head start in your Level 2 studies but also refresh the Level 1 concepts in case you have to return to Level 1 prep. Beginning Level 2 prep early is therefore a win-win situation for you.
Further, the structure of the Level 2 exams is way different from Level 2 which has vignettes instead of multiple-choice questions. This requires some practice as it is based on understanding the concept behind the question instead of memorizing the answers to multiple-choice questions. Absorbing the new learning style alone will take some time and hence it is advisable to start studying for next year’s CFA level 2 as soon as possible.
Tips for Last Month of CFA Level 2 Studying
When you have one month to study for the CFA Level 2, what should you to do optimize your preparations in this period? Of all the possibilities, the key here is to focus on prep and prioritizing what to study.
Here are some tips for you to follow in brief.
- If you are working with reputed course guide materials, you can check from the study planner whether you are on course and can finish the curriculum within the last month or need to blitz through some topics.
- Focus on Ethics: This topic is heavily weighted in Level 2 (and in other Levels too) and the questions are very hard. Doing or not doing well here might make all the difference between success and failure and so ensure that you have this topic under control.
- In the last month of the prep, practicing for the real day is the best way to prepare for the exam. While doing so, follow the exam time limits so that you can simulate the test conditions. How many practice exams should you go through in the last month? Aim for at least 4 to 6 sets of practice exams to build confidence.
- Optimize your study effectiveness in the last month by increasing your course material absorption and understanding per unit of time. Check out different places where you can focus more and stick to the one you feel the best. Switch to a new subject once you get tired of one.
The last month is crucial for your preparation but even then, take a break sometimes or go for a jog to keep the mind refreshed.
Summing Up
Studying the curriculum for CFA Level 2 is not easy as there is a lot of reading to do. Ensure that you block several months to prepare well for the exams, focusing on and re-reading sections that do not come easily to you. How many hours should you study for Level 2 of the CFA program? Though a minimum of 328 hours is the norm, aim for more to get used to the structure of Level 2 which is radically different from Level 1.
Finally, emphasize the subjects that have more weight – Portfolio Management, Financial Reporting and Analysis, Equity, Fixed Income, and the all-important Ethical and Professional Standards.
