CFA Level III, here I come!

Good evening everyone!

I know it’s been a long time since I last posted on the site and I would like to apologize for not having been adding new content since the end of May.

Quite frankly the reason why I’ve been away from the blog from a long time is twofold. First, I am planning my wedding for the end of the year and it is taking me most of my spare time – for those of you who are married, you know what I mean. Second, I had a very bad feeling when I came out of the Level II exam and I was actually quite disappointed. So, I decided to take a break and to focus on the wedding before heading to my summer holidays and to wait for the results. In the end, once it’s done, there is nothing you can do about it.

Tuesday, late in the afternoon, I finally got the crucial CFA e-mail, which noticed me that I had passed the Level II along with 43% of that level’s candidates. I literally jumped out of my chair as if I had scored a goal in the champions league final. Let’s face it, I most certainly had a bit of luck here.

Looking at my “detailed” results (which, as you well know, I’m not allowed to share), I then realized that my work had paid off. Although I did not post about the accounting part because I feel I am not expert enough to really publish something about it, I really paid a lot of attention to this section of the curriculum. And it paid off. As a matter of fact, there is so much weight on this topic in the exam that you can definitely get yourself in a nice position by being confident on the classic exercises. I did practice a lot using Schweser’s QBank and practice exam. In the real exam, I felt accounting questions were not that vicious and hence I managed to score high there. So, for those of you who are taking the Level II next June, spend a lot of time on accounting if you’re not very good at it. The material is quite huge, but as your practice it will start making sens and quite surprisingly there is not much to learn by heart in a way: it is more logic that it might seem at first glance.

Free cash flows are also a major topic of the Level II. Again, when you look at the formulas you might get scared at first glance. However, you should realize that by learning the main formula, you can derive all the other without learning them by heart. Again, even this basic formula might seem quite complicated at the beginning, but it really make sens once you get used to it and I found it quite easy to apply once you understand the rationale behind it.

Economics and Alternative Investments were the most complicated parts of the curriculum to master in my opinion. In fact, I believe that both these topics require a lot of material to be learnt by heart if you’re not practicing them in your daily job. And I hate learning stuff by heart. Derivatives are of the same kind, but with my quantitative finance academic background, I already knew all the material. Again, if you’re not familiar to derivatives, you will have to grasp a lot of concepts which take time to get accustomed to.

All in all, I would say that the basic strategy is really not to give up on any topic of the curriculum. Of course, there will be part of the material you will not be comfortable with on exam day, but you definitely should have an idea of what’s going on everywhere. If you can’t master something, at least grasp the global picture. This is key because it will most of the time allow you to discard one of the three possible answers. Once this is done, even if you choose randomly between the remaining two answers, your probably of success drastically goes up to 50% instead of the initial 33%. Plus, don’t forget that item sets are composed of questions of various difficulties. Hence, being able to score on the easy questions is critical as it can considerably improve your overall result. Remember that if you get battered in a particular topic, it probably won’t matter what you’ve done in the rest, you will fail the exam; the passing criteria are not public and I suspect there is a minimum score for each of the topics.

To sum up, I’m really happy to be done with this Level II because I heard it was the most difficult of the three for candidates with my profile. I must say that I won’t be disappointed of not having Economics and Financial Accounting in the Level III material, but I will have to work extra hard on my writing skills as the Level III’s morning session consists in writing small essays… not in question sets.

I’ll be back soon with more posts on something else than the CFA!