Well, I hope you folks won’t mind if a charterholder weighs in here.
Anyone who says he’s ‘23’ and ‘doesn’t need it’ is hallucinating. Sorry, man, but you’re whistling going past the cemetery. You do need it. You just don’t know it. This is a textbook case of someone who doesn’t know what s/he doesn’t know. In business, that’s often lethal to one’s career. Wise up, man.
For starters, I’ll be 71 in December. I passed Level III in 2006 when I was 62. I don’t know if I’m the oldest newly minted charterholder the Institute ever had, but if I’m not, I’ll bet I’m close.
By the time I got on the CFA track, I’d been a CFO, a strategy academic for a half-decade, and a successful self-employed consulting guy (specialty: business valuation) for over a decade. I’m also a CPA. Let me give it to you straight: Getting the CFA charter is the best thing I ever did–for my career and for myself. It’s also the hardest thing I ever did. The CPA exam was a complete no-brainer compared to the CFA tests. There is no comparison. None. And getting my MBA was also a no-brainer by comparison.
Let me offer some comments and tips from my own experience in the CFA regimen:
- I don’t recommend bypassing the underlying readings. You should read them and take notes, esp. around the LOS’s.
- Remember what the goal is: to pass the exams. It is not to learn. You can learn later.
- I cruised through Level I. Hardly studied. Then I got my head handed to me the first time I took L2. I learned then–and it applied to L3, too–that I needed a test-taking strategy. That’s an unfortunate commentary on this process, but I also believe that almost every candidate needs such a strategy.
- The natural inclination for most of us is to strengthen our weaknesses. That is backwards from what you should do. That takes us back to having a strategy. (I’ll elaborate on that momentarily.)
- Start studying early. Keep after it, and keep a log of what you studied and for how long.
- Only someone who thinks cordless bungee-jumping is fun should take a three-week vacation < 60 days before the exam. That is just plain dumb. . .unless the individual plans on devoting several hours a day to studying while on holiday. Frankly, I think that’s a good time–probably the best time–to study. Study from 8 a.m. until noon each day, and then go play until the next morning.
- When I was a candidate, I knew a couple of guys from Goldman. They said that the charterholders in their firm had told them to (a) read the Schweser readings, and (b) work a bazillion questions in the Schweser Question Bank. The clear message was to bypass the readings themselves completely. I tried it @ L2, and it didn’t work for me. Guess I’m not as smart–or as young–as they.
- Here’s how I prepared after getting my backside kicked the first time I took L2: I (a) read the underlying original readings; (b) took meticulous, full-sentence, handwritten notes keyed to the Learning Outcome Statements as I read; © watched the Schweser videos and confirmed the accuracy of my notes as I did so; and (d) worked problems until I was cross-eyed.
Now I want to talk briefly about having a test-taking strategy. You need to find a way to get to a 70% RAW score; 75% is even better because that gives you a margin of safety. Calculate your raw score by looking at each of the topic areas for your upcoming test and the weight it is likely to have on the exam. Multiply the weight by your perception of your current level of knowledge on that topic. Add the products up and see where you stand. If you’re at 75%, then just prepare in a way akin to my Comment #8 above.
But if you don’t get to 75%–few of us who are truly honest will get there–then I think you have to (a) build on yoru strengths, and (b) study harder not only in areas where you need shoring up BUT ALSO in areas that are going to appear again on future exams. Back when I was taking L2 and L3, the primary areas were portfolio management (50-60% of L3) and derivatives. There is no such thing as knowing too much about either one of these topics. Time invested study these at both L1 and L2 is time well-spent because both show up again on L2 and L3. So, if you’re weak in either one of those, you should consider ‘bulking up’ your study with those two.
If you’re still not to 70-75%, then bite the bullet and get after fixed-income. When I was taking these test, FI was the topic with the heaviest weight on L2. If that’s still the case, then you are unlikely to pass L2 without knowing FI pretty well.
FWIW, I found L2 to be THE hardest of the three exams. IMHO, it’s the hardest, not because the material is difficult, but because almost all of the FI readings for L2 and L3 were written by the same guy: Prof. Frank Fabozzi of Yale U. I’m told he’s the pre-eminented fixed-income expert in the United States. If that’s true, it is certainly not because he’s a good writer. Quite the opposite, he is the worst writer I’ve ever encountered in nearly 40 years as a professional. Mr. Fabozzi never says in 50 words what he can say in 50,000. I found his writing to be wholly anesthetizing. He’s just a dreadful writer. Horrific. And I speak as a guy with a high tolerance for academic abstraction. But Fabozzi’s writing is simply awful. The only consolation is that everyone else has to suffer through him, too.
DO NOT expect to get elevated from Group 10 to passing by appealing your grade because you shot out (or think you shot out) the lights on Ethics. When I was a candidate, I heard repeatedly from those who were already charterholders and also from those who taught for Schweser that they knew of no one who had every passed because of a sky-high grade in ethics. If you can score in the 51%-70% band there, you’re doing just fine.
Here’s a personal anecdote that I hope everyone will find useful: As a recovering academic, I know how to study. I know how to take tests. So do the vast majority of those reading this post, esp. those with graduate degrees. For L3 in 2005, I studied for over 450 hours. . .and did not pass. (The Institute didn’t have ‘bands’ back then, so I don’t know how close I came.) I do know that, when I got the result, I felt as if I’d been kicked in the stomach. I mean, I had taken meticulous LOS-oriented notes–228 pages of them, in fact. And I still didn’t pass. Based on what I’ve learned since, the 2005 L3 exam appears to have been an aberration–it was really a poorly constructed test because the baseline average score (for the top 5% of test-takers) from which the MPS is determined was notably below what the Institute was accustomed to seeing. Those who know a lot about statistics will rightly infer that the L3 exam, at least back then, was not a statistically reliable testing instrument. One could see that from the 10-20 percentage-point variation in year-over-year pass rates on L3. Whatever advice the Institute was getting back then from professionals in psychometrics (the science of constructing testing instruments that have high reliability and high validity) was lousy. Given the leveling out in L3 results after 2006, I think the Institute finally got religion on this issue.
Penultimate comment: In preparing for any level of the testing regimen, there is no such thing as working too many questions. But you also cannot expect to pass doing test-bank questions alone. Again, read the reading, take good notes, read Schweser’s write-up of it and check your notes, and then work questions from the test-bank.
Closing thought: By May 1 (or, for December test-takers, Nov. 1), you should have completed all of your reading and note-taking, plus a whole bunch of test-bank questions. Your test-taking strategy should have you consistently scoring north of 70% overall. That leaves you the last month to take mocks and bulk up your working of test-bank questions in those two or three areas that are (a) major parts of the exam, and (b) you are likely to see again. Get plenty of rest the last two nights before the test. If you don’t have a regular exercise reigmen, get one. It will reduce anxiety, lower your blood pressure, and help you sleep better. Those are all pluses, not just for test-taking, but also for healthy living.
Look out for Fabozzi’s readings for L2, though. They’re the quintessential antidote for insomnia.
Good luck, everyone!
