What to Expect on the CFA Level 2 Exam

If you’re reading this then you’ve already probably passed your CFA Level 1 exam and are getting ready to register and study for Level 2. (Either that or you’re getting yourself prepared for the long road to CFA charterholder status well in advance of all three!) As discussed in the first blog post of this series, in Level 1 you build a foundation of core investment valuation knowledge. The CFA Level 2 exam becomes about the practical and theoretical application of that knowledge.

Just as in the CFA Level 1 Subjects, the exam weights at Level 2 are still rather evenly distributed over the same topics. The ranges remain between 5-25% overall. However, Level 2 requires you to take a more in-depth dive into dealing with investment management and portfolio distribution. The emphasis is more on complex analysis with a concentration on valuing assets. The exam tests your skills at handling equity analysis situations by examining how you solve ‘real-world’ valuation problems.

CFA Level 2 Exam Date

CFA candidates only get one chance a year to sit and pass both Level 2 and 3 exams. The next exam date will be in June 2019. For more information on key calendar dates, check out the table here.

CFA Level 2 Exam Differences

There are a number of differences between sitting the Level 1 exam and progressing onto Level 2. Where Level 1 is compiled of stand-alone multiple choice questions, the format for Level 2 is more complex. Over the morning and afternoon session, expect to complete a total of 20 ‘item set’ questions. Each item set comprises a mini case study-like vignette with six multiple choice questions to follow. The 20 item sets are all equally weighted, so each answer is worth 3 points each. Therefore allow 18 minutes for each item set to address each problem equally.

CFA Level 2 Exam Weights

The Learning Focus for Level 2 is "Application and Analysis," while the Topic Focus is "Asset Valuation." The structure breaks down like this below and varies slightly from year-to-year.

Topic Exam Weight
Ethical and Professional Standards 10-15
Quantitative Methods 5-10
Economics 5-10
Financial Reporting and Analysis 15-20
Corporate Finance 5-15
Equity Investments 15-25
Fixed Income 10-20
Derivatives 5-15
Alternative Investments 5-10
Portfolio Management and Wealth Planning 5-10
Total 100

(Cfainstitute.org, 2018)

My Tips for Passing CFA Level 2 Exam

    • The topics at CFA Level 2 build on from Level 1. So, be sure that any of your weak points on the foundation level will really start to show through here. Knuckle down on those subject areas that haunt you from Level 1. Otherwise, the cracks in your knowledge will only get worse from here on.
    • Don’t skip readings! Skipping a reading on Level 2 stands to lose you 5% of the exam if it happens to show up in an item set. The risk is not worth it.
    • Bear in mind you’re a year older and wiser than when you sat the Level 1 exam. Take into account the extra distractions you may have in your life now and renew your commitment to study. Only putting in the necessary study hours will help you achieve that significant pass rate at Level 2.
    • Remember that Ethics maintains a high weight on the Level 2 exam, so don’t put it off! I always point out that ethics is where a CFA charterholder can make a huge impact. Check out this video I recorded advising financial people to 'Care for clients as you would your mother.

Over the last three years, the pass rate for CFA Level 2 is only 3-4 points higher than at Level 1. Don’t get psyched out into resting on your Level 1 pass laurels. Stay determined. Remember there’s a year’s wait before you can retake the exam, so don’t waste time. Be Level 2-prepared the first time around!

Keen to learn more? Check out the next in the series here: What To Expect On The CFA Level 3 Exam

(And don't forget to check out my #1 study tip for passing the CFA exams here too!)

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