My suggestion on cracking the L2 curriculum effectively

Hi All !

I think there are many kind souls in AF that provided tips/suggestions on how to crack the L2 exam - allow me to contribute a little bit of how my approach has helped me on organizing/absorbing the L2 materials more effectively/efficiently.

A lot has been said on how many hours should one prepare - what material is the ‘best’, whether you should religiously go through the CFAI text, time management strategy etc. Little have been discussed on your approach in studying the curriculum. If you are like me - probably you do not have the luxury (time/resources) to attend structured classes that is aimed to build your knowledge up in a logical/effective manner. Chances are - you will be reading study session by study session on their own - trying to complete EOC/Qbank one topic by topic.

I think my suggestion is that we should try to conceptualize the materials presented, and build a mind map to connect each topics we learn into one big, coherent, L2 curriculum/ an interconnected body of investment knowledge.

For example - Quant in itself may seem to be a very dry and technical topic - but I think the mastery of this session is really the pre-requisite for you to learn effectively in portfolio management where many of the formula are just variations/modifications of the multivariate regression model. If you understand the model good enough from the study session on Quant, reading the rationales of the pros and cons of each modeling choice will naturally enable you to understand how say, capm - apt - macro models are derived. Well, almost no memorization of formula in Portfolio management study session is needed if you conceptualize this. Even among the models themselves - say apt and macro - instead of understanding what apt or macro are for on their own, we can spend time to understand what is the difference between the two models - what are the characteristics of each models etc (Don’t wait for the study guide to throw you a comparison table then only you think about the differences - active learning is the key - and conceptualization and linking things up is the way) .

Another example - there are concepts you can actually link between economics (exchange rate parity, discounted forward rate to the concepts used in forward/futures valuation in derivatives). Understanding one session should enable you to understand the other session in a more natural/logical manner. There are texts in economics too talking about growth and investment decision - these topics help you to understand the top down analysis in Equity valuation (Porter 5 forces, industry analysis etc).

In the case of say Equity Valuation - it seems like a huge mess with so many different formula - but fundamentally the concept is really easy - you are discounting something in the future to arrive at a valuation today (A discounted cash flow concept you should learn well from Corp Fin topics as well - another conceptual link). The text breaks it down nicely to you into just a few methods - discounting the dividends, discounting the cash flow, discounting the residual value etc. You may learn each methods well and can answer question about them when the question specifically ask you to use certain method - but in the exam you are presented with many variables and you will need to decide which method suits the circumstances presented. - Knowing each model on its own certainly would not be enough here - you need to understand when and how should you apply a particular model and not others - a need can only be fulfilled if you understand the concept of the entire valuation, and how each model is different with each other.

To summarize - understanding the concept is as important as understanding each component in detail on their own. To do this effectively you should try to link the things you learn up in your mind to form a huge mind map. I found it interesting too when I learn things this way - I keep prompting myself "Why this formula? What’s the difference between what I learnt in the previous topic and this? " when I study . I think this might help you retain the materials longer.

comments/other suggestions welcome. =D