Hi everyone, would like to consult seniors here who have gone through the L2 exams - how much of L1 content is required/needs to be retained as we prepare for the L2 exam?
My room is packed to the brim with many items and I am contemplating to remove my L1 notes, but am thinking what sections/contents that are relevant to L2 and that I should retain for L2 preparation. I have skimmed through the 2013 L2 content briefly and it appears that L2 content solely by itself is already more than a handful to handle.
Any discussion and discourse on specific important study content on L1 retention for L2 is much appreciated.
i am in the same boat, but other than the ebook of the L1 curriculum for general reference, I don’t plan to hoard anything else. And then we have this forum to go over nuances.
At first I was worried if I would have enough time to properly prepare for L2. Signed up like the last possible week because I wasn’t sure. Decided to get it over with rather than wait another year.
IMHO, most of the L2 material is an extension of L1 stuff. For example in FRA, you still need to know how to solve for important ratios as before but in L2, you’ll learn how to detect suspicious numbers and how it affects the rest of the finanical statements. Obviously there are new topics included (I don’t think pensions were in L1 but I had a tough time with that reading on L2) but the vast majority of readings are simply extensions of the readings from L1. You still have swaps and FRA in derivatives on both L1 and L2. Generally a lot of overlap. In the end, I’m glad I took it this year because I would have forgotten most of it come next year.
That being said, I rarely read over L1 books, because they still go over it in L2 cirriculum; I just recognized the stuff from before but they’ll still explain it albeit not as deeply.
There’s a lot of carryover in accounting, derivatives, and equity. However, all the relevant topics are included in the L2 books, but marked as optional. For e.g., in derivatives, you’ll see reprints of the basics covering futures and forwards before they jump into valuation. So you don’t really need anything from L1, however, I’d hang on to your personal notes in case you need to go back for reference.
I’d definitely take L2 2014 if I were you. I mean you have more than enough time to pass. Now if someone was a Dec L1 passer, they would have to think about L2 next june because of time constraint, but you have 10+ months to prepare so I’d definitely take it next year if I were you.
It all depends on how much time you have to spare. L2 is L1x2 or L1x3 depending on who you ask. I know people who have failed the exam multiple times, but are still going strong. However, you shouldn’t be putting in two years to prep for the exam. The program is designed so that you can pursue it with a full time job and probably a family. No one said it was going to be easy. In fact, based on my research, L2 seems to be the toughest of all three levels.
The best advice I can give you: start early and keep practicing. Understanding concepts will put you over the top and beyond. Memorization and taking shortcuts will put you on the borderline, which is never a groovy place to be in. Forget every process you had grown accustomed to during L1. No mocks will prep you for the real L2 exams… they will spin questions, so your brain really needs to understand how to solve a problem 10 different ways.
Thanks for the insights. Will bear them in mind. Hmmm… having doubts as I feel even 1 year of preparation may not be sufficient for L2. My L1 pass is not a good pass, (>70% in 3 topics and 51-70% in the other 7) so in terms of foundation knowledge I may not be that strong. But at the same time I dont want to take too much time to attempt.
Use the time to deepen your knowledge. While L2 is an extension and deepening of knowledge, the manner in which it is tested is so very different from L1 that my best advice to you is to treat it as if it were completely unrelated to L1. Study and understand as best as you can because L2 exposes all those who have superficial knowledge and think they can hoodwink their way through … L2 takes real commitment to learn rather than to superficially know.
Like others said, L2 will show you all the formulas you need so you don’t need anything from L1. It helps to know the formulas and concepts from L1 but you might as well learn them from L2 material if you forgot them.
Equity and FRA are core to L2 and were probably the easiest sections on the test in 2013. My suggestion would be to start w/ those two sections, do all the other material, and then repeat those two sections at the end. IF you get good scores on those two sections (well above 70), and hold your own on the rest of the test, you should do fine.
I think L1 is base on which you will build on in L2. So, although it is not important to remember every bit but core message and concepts should be with you while taking L2.
You’ll need to remember ALL of the concepts, but probably very few of the formulas.
EG - Variance and Standard Deviation are extremely important, even more so at Level 3. But after Level 1, you will never be asked, “Given this set of data points, calculate the standard deviation.” It’s more about the application of StDev, and the shortcomings of it under certain situations.
The same thing is true with almost all formulas–duration/convexity, beta, delta/gamma, statistical significance of the correlation coefficient, etc.
The formulas that you WILL need to remember, such as Gordon Growth model and CAPM, will be repeated in the Level 2 curriculum. (Gordon and CAPM will be repeated and repeated and repeated and repeated and repeated and repeated…you get the picture.)
There’s actually not a lot of carryover from Level 2 to Level 3. Level 2 is all about asset valuation, and has very little portfolio management. Level 3 is all about portfolio management, and has very little to do with valuation. For the most part, Levels 2 and 3 are very different tests.
There is some carryover in Equity Market Valuation, which is very akin to valuing a stock. The difference is–you’re using the growth rate of the economy and the dividends of an index rather than of the individual stock. There is also a little bit of carryover in the Capital Market Expectations portion.
Just like mentioned before, you’ll want to remember almost all of the concepts regarding Fixed Income and Derivatives, but you won’t be tested on the calculations.
One particular note–you will want to learn (both inside and out) all of your currency translations and purchasing power parity, etc. This gets particularly tricky in Level 3.
You need to know all the basics of economics, derivatives, equities, fixed income and portfolio management for L3.
There are no statistics in L3, no direct “accounting” questions in L3 (no translation, no pension accounting, no consolidation, etc), and no FCFF/ residual income stuff in L3…
almost EVERYTHING you learn in portfolio management you will need to know for L3, but of couse it’s a relatively small section in L2, so there aren’t much to remember.
I’d say you also need to know the calculations of forwards and futures (for commodities in L3), and swaps and options payoffs for L3.
I don’ t know if i have missed anything, other people can add to it .