Level Two Study Strategy

For a chronological index of my path to the CFA, click here.

Well it’s been about a month since I began studying for Level II so I thought I should check in. Am having great difficulty averaging an hour of study time per day, how about you?

“We candidates are parcels of vain strivings,
Tied by chance and a set of six volumes together.
The mass of us lead lives of quiet desperation.
What is called ‘program registration’ is confirmed desperation.”

– Henry David Thoreau, CFA (expected 2010) –


I got a question from a reader about whether I’m preparing for Level II the same way I did for Level I. Mostly I am, not only because it worked for Level I, but also because a similar approach proved golden during my years as an engineering student.

The strategy’s focus is primarily on working problems, ad infinitum, until test day. However, you do need to be somewhat familiar with the theory first. So we do a little reading up front, followed by a LOT of problem-working later on.


Confirmed Desperation

So here’s my battle-hardened strategy, updated for Level II based on lessons learned from Level I:

Step #1: Read all chapters of all volumes, quickly & sequentially
It certainly makes sense to read a particular study volume’s chapters in order (with many chapters building upon previous ones), but why also proceed through the six volumes sequentially? Because if I don’t, I risk covering all the fun, easy volumes in the beginning and saving all the hard, boring stuff until the very end – when I’m already fighting burnout. I skip all sections marked “optional” though. It bothers me to do this but time is finite and we must choose our battles.

Step #2: Work all problems once
While reading the chapters (Step #1) one occasionally comes across practice problems. Sometimes it’s a single example problem in the middle of a chapter – sometimes a whole set of problems at the end. Regardless, I stop reading and take the time to work each problem I encounter. If I miss it, I review the solution and continue on without dallying. Like a shark, I must keep moving or die (work with me! work with me!) and the point of Steps #1 and #2 is to make sure that I’ve read every page and worked every problem at least once before test day. In reality, that won’t be enough to pass, so…

Step #3: Upon completion, randomize and re-work
So I’ve now read 3000+ pages and worked 1000+ problems. But it’s taken months to complete so a good portion of what I’ve learned has leaked out of the neurons and is floating off-radar in the dark synaptic void. My focus now is to re-work as many of those problems as possible until test day as this is what really helps burn to disk. But while I’m still going to work each chapter’s problems sequentially, I’m going to proceed through the chapters themselves in random order. The randomization serves to (a) make sure I’m reviewing all 6 volumes simultaneously ergo keeping it all fresh and (b) mix some fun, easy material in with the hard – mitigating monotony and maximizing morale, thus mastering the myriad.

Step #4: Mind the Gaps, or Learning Outcome Statements
Not every chapter has a set of problems at the end. And here’s something I only discovered days before the Level I test: even for chapters that do have problem sets, not all the LOS’s are always covered in the problems. So when I’ve just finished working all the exercises from a random chapter, I review the LOS’s at the beginning and re-read parts of the chapter if necessary to fill gaps.

Well that just about covers my main topic. Don’t want this post to be too long, but I am nearing the end of Volume I so I’ll give a very quick list of impressions.

Volume I has 3 topics in one study guide: Ethics, Quantitative Methods, and Economics.

Volume I, Part I: Ethics
At first seemed like just a review of Level I, along with some additional examples to drive the points home. But then there were some new areas regarding sneaky-sneaky things I would never dream of doing! One is charging clients for purchased analyst reports that you don’t even use in managing their account. Other unethical evil-doers may bill a client for the chair that they sit in while managing his portfolio! Actually, it was all news to me that any of these costs could ever be passed on to a client. I thought almost all fees were based on a small % of the value of assets under management. You mean the client could also pay the tax, tag, and title for the car I use to get to work to manage his account? Ah well, it seems that’s against the CFA rules too…

Volume I, Part II: Quantitative Methods
The one hintergedanke that was omnipresent while proceeding through this stuff was that this seemed pretty advanced for those candidates coming from a business background. Do they teach you about wide-sense-stationary random processes in business school? Multiple variable linear regression? Time series forecasting? There was a lot packed in here and I was just thankful that not all of it was new due to my signal processing background. Certainly a CFA can help engineers cross over into a business career. But if Level III’s quantitative sections are any more deep, the CFA may also be a good starting point for business majors wanting to break into engineering…

Volume I, Part III: Economics
Still haven’t learned to like economics. I find the reading somewhat interesting, especially the ones that attempt to prove once and for all which sides of some very political issues are the correct sides. My all-time, jaw-dropping-open favorite has to be the one on page 506 arguing against international trade restrictions:


Poor countries have a comparative advantage at doing “dirty” work, which helps rich countries to achieve higher environmental standards than they otherwise could.”

Well it’s just win-win for everybody, huh?! Apparently you can either be an economist or a member of Amnesty International, but not both.

But apart from getting shocking free-market arguments to try out against leftward-leaning dinner guests, the bottom line of the econ sections is that I just don’t seem to learn anything I can actually use in making day-to-day portfolio decisions. It appears hard for the authors to draw many airtight conclusions either as evidenced by the lack of any problem sets at the end of many economics chapters!

Ah well, back to the books. Also look for a facelift of this site coming soon if all goes well. It’s just starting to feel too Web 1.0 …

For a chronological index of my path to the CFA, click here.