How to remember 90% of what you studied?

This post is going to offer the most important advice on HOW to study for the Chartered Financial Analyst exams, or really any exam.

Unfortunately, it is the one of the hardest things to get through to candidates. Too bad since candidates that simply read through the curriculum or watch videos will remember about half of the material. Is it a wonder then that half of the students fail each level of the exam in any given year?

The most important advice I can offer is understanding the difference between active and passive learning. Passive learning is where the student does not participate but simply absorbs the material through sensory perception- examples include attending a lecture, listening, reading and watching a video.

Active learning is when the student takes a participatory method through discussion, presentation, simulation or practice. Active learning promotes problem solving, critical thinking analysis and synthesis of the information.

The importance of active learning is displayed in the graphic below, based off a study by Edgar Dale on teaching.

With the limited time you have left to study, and the intensity of the material in the CFA exams, is there any question which methods you need to use while studying? Granted, you will still need to read through the material to start, but you shouldn’t spend your entire study time (or even a large portion of it!!) simply reading. This is why a condensed notes program is so important. You can go through the FinQuiz curriculum notes in a fraction of the time it takes to get through other provider notes or the curriculum itself.

This will leave time for the real money-making study activities, the studying that is going to get you points on the exam!

So what are the active learning strategies for the CFA exams?

1) Form a study group

This will make it necessary to talk the material out loud. A great way to run the group is by dividing the topics between members, each member ‘teaches’ the group a topic each week. Make sure each member ends up ‘teaching’ each topic so you cover all the topics multiple times.

2) Practice Problems, Practice Problems, Practice Problems

The FinQuiz test bank includes almost 5,000 questions created directly from the curriculum and more than 100 item sets. ** I know it is a pain focusing your study time on practice problems. Don’t forget, I was a candidate just last year. You can plan on doing problems all you want, but it won’t make a difference until you actually sit down and do them.

Level 3 candidates, this means working the old exam essay questions released by the Institute. The last three years of the morning session are available on the Institute’s website. We will be working through some of the old essay questions on this blog and cover the important topics you need to know.

3) The end of chapter questions and blue-box examples within the curriculum are an invaluable source of practice problems and scenarios. Use these in conjunction with a test bank of questions to make sure you get all the active learning you need.

4) If you can’t find a study group, write the topics out or use this blog as your active learning venue. Let me know if you want to write a blog post on a particular topic or study session. We are always looking for guest posts and any way that will help our candidates pass the exams.

So active learning is probably not the easy solution you were looking for to pass the exams. Sitting down to a heaping bowl of exam questions is probably not your favorite dish, but it will get you closer to that charter. I am looking at mine right now as I sit in my office. Stick with it a little while longer, find that motivation to study a little more, and you’ll be looking at your charter soon!

Happy Studying,

Joe Hogue, CFA

P.s. Surely there’s got to be more examples of active learning methods than the four above. What other ways have you used to actively participate in the material?

Last updated: September 30, 2016 at 6:13 am

CFA Level 2 Exam and Overall Strategy

CFA Level 2  exam still draws from the same 18 study sessions seen in the level 1 exam but with different topic weights. The topic area weights for all three exams are shown at:

A couple of things you might notice:

1) Ethics!!!!! Learn Ethics! You saw it at I and will see it again at III. I cannot stress enough that the earlier you learn the ethics portion the easier all three levels will be. The CFA Institute has explicitly said that scores close to the cut off pass/fail are determined by how well you did on Ethics. LEARN IT!

2) All study sessions will be tested at least 5% but Financial Reporting & Analysis, Equity, and Ethics will be at least 45% or more of the exam. That is almost half the exam in just three topics! Cover all the material but make sure you master these three.

The volume and depth of information at level 2 is intense! I, along with many CFA candidates, feel it is the most difficult exam. The level 1 exam was much more an introduction, while the level 3 is more conceptually-focused and can be relatively easy if you master the essay portion. The CFA level 2 exam is very quantitative and analytically-focused.

CFA Level 2 Exam Format

The exam is split into morning and afternoon sessions each with 10 ‘item-set’ questions. Each item set question is about a page long scenario followed by six multiple choice questions. Each item set will only cover one study session topic like ethics, economics, equities, etcetera. Each question within the item sets will be worth 5% of the overall exam score.

This means there is a possible 360 points with each question being 3 points and each item set worth 18 points. The passing score is determined after grading all the exams at each level. While the CFA Institute does not publish what the passing score is for each year, they have said that no score of 70% or above has EVER failed the exam. What does this mean? It means you should be completing practice exams and aiming for a score of at least 75%. Your practice exams may not mimic the actual exam exactly, but shooting for a higher average will give you some breathing room when it comes to test day. Check out the FinQuiz question bank for nearly 5,000 practice questions and 200 item set problems.

As with the other level exams, pass rates have been decreasing and range around 40-50% of candidates. Just as with the passing score determination, there are theories about why the pass rate is declining, but again does it really matter? You only need to be concerned with averaging above 75% on practice questions, nothing more. Focus on that.

Basic Strategy for CFA Level 2 Exam

Many providers will suggest that you read through the six item set questions then go through the scenario. This will give you an idea of the information for which you are reading. For example, if you see an item set question asking for the portfolio sharpe ratio then you know that you must look for the portfolio return and standard deviation within the scenario.

The strategy works like this:
1) Read through each question, highlighting and noting important data needed.
2) Start reading the scenario.
3) When you get to data or information needed to answer a question, you can either highlight it or immediately stop to answer the question.

Time is critical in the level 2 exam, especially if you are a slower reader. This strategy is a useful one (and generally recommended for most), but do not force yourself to do it if it does not suit you.

I knew that the strategy above was not appropriate for my style. I like to take each question separately and reading through all six at once wouldn’t help to remember the pieces of information needed. My strategy (as with above, don’t force yourself into a strategy, go with what feels natural):

1) Skim the scenario, highlighting and making notes for numerical information and stuff that might be important.
– After enough time studying, you get a fairly good idea of what information might be important.   For example, if the item set is on ethics and you read that someone is tipping off their aunt before significant news is released, then that will probably come up in a question.
2) Start with the questions, they are often in the same order as in the scenario. For each question you go back to the part within the scenario and pick out necessary details to answer the question.

** I have to stress that this will not be the best strategy for everyone. If you are not able to skim the scenario quickly and pick out important information, then use the other strategy and read the questions first. The important advice here is that no single strategy will work for everyone.

Do not think that you can approach CFA level 2 exam like you did the first exam. You must be comfortable with the item set format and understand HOW you are going to answer the questions.

After each study session, i.e. reading through a topic:
1) Complete individual questions, at least 20 or so. This will help to quickly test yourself on the material.
2) Do at least (2) item sets to test yourself on the material and get comfortable with the format.
3) Always, Always revisit the material the next day with another round of questions and an item set or two. This will help to solidify the material you learned the day before and turn short-term memorization into long-term memory. It will also help test how well you are studying and learning the material.

Good Luck. Looking forward to your questions and comments.

Joe Hogue, CFA

Last updated: September 19, 2016 at 8:23 am

CFA Level 2 Exam – How hard ?

The Level II Exam is, in mine and many other candidates, the most difficult level of the three CFA exams and it might be hard to narrow it down to just five things.

CFA Level 2 – Don’t Underestimate

I was pleasantly surprised at the ease of the Level I exam. The exam was not necessarily easy but it was less detailed than I was expecting and I had studied more than I probably needed. While I am not sure that I consciously underestimated the Level II exam, I may not have studied as hard as I did for the first exam. The exam was harder than I anticipated and I was sweating bullets for the full six hours.

The CFA Level 2 Exam is arguably the most difficult of the three and also possibly the most important. It includes some of the most important valuation and analysis techniques that you will use as an analyst. Spend as much time as you can devote to learning the material.

CFA Level 2 – It’s all about the Detail

While the first exam seemed a mile wide and an inch deep, CFA level II exam is a mile deep but covers less breadth. Sure there are still the 18 study sessions covering the same topic areas, but it seemed like only a fraction of the material in each topic was important but that fractional portion went into amazing detail.

Case in point, the financial reporting topic in the level I exam barely scratches the surface with a general description of the statements and how the relate to each other. In CFA level 2 exam, you will be looking at the accounting for individual line items within the statements and the calculations can get extremely lengthy. The CFA Level I exam was mostly questions on qualitative concepts, the Level II exam is much more quantitative.

CFA Level 2 – Practice the vignette structure

The item-set structure of the CFA Level 2 exam throws some candidates. While the questions usually appear in the order that information appears in the vignette, it can still be a lot to read and remember.

There are two approaches to the structure. Some candidates prefer to read the questions quickly to get an idea for the information for which they are looking. Then they read through the vignette and underline relevant data. The second approach is to read through the vignette first, underlining data that looks important, and then go through the questions. After having gone through the curriculum and practice problems, you’ll have an idea of important information so it’s not entirely a guessing game.

CFA Level 2 – Don’t buy your flashcards

Practice problems are even more important when studying for the Level II exam. The test is very quant focused and there are quite a few accounting processes that you must remember within the FRA topic area.

Writing down the problems and processes is a much more effective learning technique than simply reading pre-made cards (remember active learning?). After working through the curriculum once, make flashcards for the more difficult and important LOS on your second run. Instead of simply writing the calculation and variables, try to make the cards as much like word problems as possible to simulate the exam. After several runs through your flashcards, you may even try re-writing the ones that are most difficult.

CFA Level 2 – You are not alone

Despite being a self-study course, understand that you do not have to go it alone. There are really two tips here. First, you are in the middle of one of the most difficult professional curricula out there. You passed the first exam but it may be hard to see the light at the end of the tunnel. Most candidates approach their breaking point studying for CFA Level 2 and you need a support system to get you through. Friends and family are the obvious choice but seek out a couple of candidates as well. Take 15 minutes a week to talk about your studying and motivate each other.

You may also need help getting through some of the intense calculations and accounting within CFA Level II curriculum. No matter how hard I tried, I could not seem to get through the derivatives material. Whether it’s another candidate or someone with professional knowledge in the topic, it may be helpful to have someone explain it from another perspective.

Half of passing the exams is studying more effectively and not being surprised on that first Saturday in June. Knowing and avoiding some of the biggest mistakes candidates make will put you well ahead and help to get you through to the next exam.

‘til next time, happy studyin’
Joseph Hogue, CFA

Last updated: August 12, 2016 at 4:44 am