Congrats to everyone who passed L2 and is looking to pass L3 next June. Just wanted to pass along some of my knowledge on passing the exam.
First of all, I heard a lot about L2 being much harder than L3 before I started studying L3. I have to admit that early on, readings like behavioral finance and PWM started looking really straightforward. I wasn’t faced with any hard valuations of securities like swaps in L2 or anything like that, so initially, I agreed. What you won’t realize is how much you need to know about every topic now. The AM section doesn’t leave you much room for error, and instead of being prepared to select the answer that you identify as matching something, you’re going to have to deeply understand all topics and be capable of regurgitating them very quickly. So lesson #1 here is to be cognizant of the material and don’t let it lull you to sleep. With two months left for the exam, I decided the L3 was going to be the most challenging for me to pass. Some agree, some don’t, but believe me when I say that you need to have an understanding of paragraphs of information and not just definitions. There will be very limited opportunities to “guess on the answer that looked right”.
Lesson #2 piggy-backs off lesson #1, don’t let the math lull you to sleep. You won’t find yourself having as many multi-step calculations like you did valuing equities, fixed income with optionality, derivatives, etc. from L2. The difference in L3 is that they start looking to trick you by adding twists in the story. Nominal/real/before tax/after tax returns aren’t always the hardest calculations, but I promise you that unless you don’t practice a lot of them, you’re going to miss a ton of points. Understanding the return calculations for individuals and institutions, those calculations come up in basically all of the past AM exams you’ll practice, and I would expect you will need to be prepared to tackle those on your upcoming exam as well. You will really need to get a feel for how to do that in the various ways that are tested. Also remember that when you fat-finger a calculation in the morning and don’t realize it, there aren’t suggested answers there to help you back into the correct answer. You need to know the math inside and out.
Lesson #3 is to finish the readings earlier than you have in L1 and L2. In L1 and L2 I always finished the readings about 4 weeks prior to the exam, then I’d spend about 2 weeks reviewing all of my handwritten notes and creating as many note cards as possible. That left me about 10-14 days to hit mocks and flash my notecards before the test. In L3, you really need to be practicing the morning exams as early as possible. That means I would suggest you get to a “mock only” zone of studying with minimum 4 weeks remaining. You see a lot of candidates in the L3 forums who studied hard, but nonetheless had to leave points blank in the morning. You need to understand the timing of the exam. That can only come with strict practice. What you’ll find on exam day is that the time crunch is even more ominous because you’re stressed. The stress is something that you won’t be able to practice, so you’ll have to be prepared to at least understand what the time should feel like.
Lesson #4 - don’t skip topics. There’s no chance of you passing because you “didn’t have time so you just skipped portfolio management and alternatives because they aren’t heavily weighted” like you might have done in L1 and L2. You need to know all of the material. L3 is less defined by topic, really all of the different topics incorporate each other and are tied together through PM. So don’t skip anything.
Lesson #5 - learn the thousands of advantages/disadvantages of all the strategies, benchmarks, etc. That’s going to take a lot of practice and will be difficult, many of them are going to run together, but seriously memorize them.
I’m sure I missed some key points but there’s the big idea. Good luck to everyone.
