How to Pass & Prep for the CFA® Level II Exam

By: Kaplan Schweser
October 25, 2021
Two candidates studying for the CFA exam
The Level II CFA exam is a considerable step up from the Level I exam so having a study plan and understanding the differences between Level I and Level II will help ensure you are prepared to pass the Level II exam. To pass the exam, you will need to achieve at least the minimum passing score (MPS) set by the Board of Governors of CFA Institute after each exam. The all-time average CFA Level II pass rate is only 46%, and 2021 pass rates have been even lower. People who are studying for the CFA exam are smart, driven, and want to pass just as much as you do. That means it is crucial that you have a study plan and adhere to it.

TABLE OF CONTENTS:

Start Your CFA Exam Level II Prep Early

Starting early to prepare for the Level II CFA Exam means beginning to prepare six-to-nine months before your exam day, and finishing three months out from your exam date. Many successful CFA charterholders credit their study routine for their success in taking the CFA exams. Not only do you need to study the material, but you also need to be able to apply what you learned to scenarios on the exam. This level of understanding and practical application takes time to develop. Therefore, it is crucial that you get into a study routine early and stick to it.

 

 

How Much to Study for CFA Exam Level II

Across the six-to-nine months that you should spend studying for the Level II CFA Exam, you should plan to devote at least 325 total hours (the average study time) to your Level II prep. If that number seems daunting to you, then consider spreading your studies across nine months instead of six. That way, you would only need to devote roughly 1 hour and 20 minutes per day (on average) to your Level II prep (versus closer to 1 hour and 50 minutes per day). Prep for longer stretches of time on certain days to earn yourself an occasional day off from studying.

How Many Study Sessions Do You Need for CFA Level II Exam Prep?

You should engage in 80-100 study sessions across your six to nine months preparing for the Level II CFA Exam. We arrived at this range because most CFA Candidates prefer to prep for a few hours, almost every day of the week. If your preference is to take more frequent days off from your prep, you can engage in fewer study sessions than that. However, keep in mind that if you were to only engage in 60 study sessions, then you will need to average 5.5 hours per study session in order to meet the minimum suggestion of 325 total hours studying. The more often you sit down for a study session, the less demanding each individual study session will be.

Review CFA Institute’s Learning Outcome Statements (LOS)

Your focus should be on the Learning Outcome Statements (LOS) from CFA Institute because they detail exactly what you are expected to do on exam day.

The Learning Outcome Statements (LOS) and core concepts are built from the Candidate Body of Knowledge, developed by the CFA Institute. They have devised study sessions and LOS to help candidates figure what should be gained from each reading. Be sure to develop your prep plan around these, as they will help you focus on the right topics for the exam.

One method of studying to help focus on the LOS is through self-explanation or by pretending you’re the teacher who has to explain to a student. Interleaved learning is another. This is the process of taking breaks so that you’re not trying to learn or practice large quantities of material all at once. Interleaved learning can morph into distributed practice, which is spreading learning over a long period of time rather than “cramming.”

Remember, the most important and effective way to focus on the LOS is to practice. Take quizzes, do problems, put pencil to paper. And if you make a mistake, that can be used to your advantage. Your brain will flare up and recognize that this is the kind of mistake that can be made, and the result is that you’re unlikely to repeat it.

Know CFA Exam Level II Curriculum and Weights

You should have a solid understanding of the CFA Program curriculum and how each topic is weighted for the Level Il exam. The curriculum is updated annually and all three levels of the exam focus on the same core topic areas. Exam weights vary by level and can change slightly from year to year, so it is good to be clear on what the weights are for the exam you are taking.

The curriculum for Level II of the CFA exam covers 10 topics, each of which is weighted. The topics and weights change regularly, but these are the most recent topics and weights shared by CFA Institute in 2022:

  • Ethical and Professional Standards: 10-15%
  • Quantitative Methods: 5-10%
  • Economics: 5-10%
  • Financial Reporting and Analysis: 10-15%
  • Corporate Issuers: 5-10%
  • Equity Valuation: 10-15%
  • Fixed Income: 10-15%
  • Derivatives: 5-10%
  • Alternative Investments: 5-10%
  • Portfolio Management: 10-15%

Although the topic weights are variable (which means they are subject to change), you can see that the one with the most weight is ethics, financial reporting and analysis, equity valuation, fixed income, and portfolio management.  As you study, you should also be aware that unlike Level I, which focused on knowledge and comprehension of investment tools, Level II focuses more on the application of these tools along with in-depth analyses of asset classes.

When deciding how much time to allocate to the different topics, each candidate will have strong and weak areas. Dedicate time to each area accordingly, but don’t lose sight of the syllabus weightings. 

Learn the CFA Exam Level II Question Format

At Level II, the exam is organized in the form of item sets that can focus on one topic or combine several. Each item set consists of related questions. These related questions are preceded by a short vignette that gives you the information needed to answer the questions. For example, an item set from ethics and professional standards will cover that topic.
 
The item sets are divided so that there are 10+ in the first session and 10+ in the second session. Knowing this format will help you start thinking along those lines as you study. Another important thing to remember is that quantitative methods can consist of one or two item sets. That introduces some mystery to the process when compared to Level I. It’s also why you need to have the topic areas down—there’s no gaming the system.

Recommended CFA Exam Level II Prep Breakdown

We recommend following the Prepare > Practice > Perform® method of studying. In your prep stage, you absorb information through reading and listening to lectures. In the practice stage, you start working through practice problems. In your perform stage, you simulate exam conditions to assess your level of readiness.

Read more about what exactly your CFA Level II Exam Study Plan should look like.

Level II CFA Exam Prep: Reading & Lectures [PREPARE]

To increase your odds of passing, you should spend up to 40 percent of your study time preparing, which involves absorbing the information by reading and listening to lectures.

Level II CFA Exam Prep: Practice Questions [PRACTICE]

On top of that, you should spend up to 50 percent of your self-study time on practice questions. Research studies have shown that practice is the most effective way to prepare for Level II.

For too many candidates, this means taking a brief quiz, marking it, and moving on. When practicing Level II CFA questions, you should spend an average of 90 seconds answering the question. However, you should spend significantly more time thoroughly debriefing the question and answer.

Debriefing Is a Critical CFA Level II Exam Study Strategy

Start your debrief by making sure the questions you got right were correct for the right reasons. Guessing right on exam day is a bonus. Up until then, it’s just another question that you need to review. For all wrong answers and guesses that resulted in a correct answer, it is crucial to find the area of the curriculum that let you down. If it’s a missed calculation, find at least five examples of that type of calculation. CFA Program Examiners are masters of hitting calculations from every angle. Just correcting the single instance which that question hit may not address the deeper issue. Your aim is to repeat the calculation multiple times until you can do it backward (which is incidentally a popular CFA examiners’ trick). Kaplan Schweser’s CFA Level II Qbank is a great way to learn question debriefing.

Different Forms of Level II CFA Exam Question Debriefing

If it’s a narrative point, find the explanation in the curriculum and see if it’s an isolated fact, part of a list, or a piece of analysis on a calculation. Isolated facts need learning. Little and often is the best way. Five minutes a day, squeezed in whilst lining up for your lunchtime burrito, can make a huge difference.

Lists are more common. Most relate to a model or a theory. It’s much easier, therefore, to learn them in the context of that model. For instance, low barriers to entry in perfect competition? It means zero economic profits in the long run. Tie facts together where you can, your brain is wired to remember stories. Cause and effect will stick a lot better than disorganized memorization.
 
And what if it’s a piece of analysis on a calculation? Go back and find an example of the calculation. Make up your own numbers if you need to. For example, we would recommend always having a simple balance sheet and income statement handy to help with ratio analysis. If you can’t figure out why the answer was an increase, decrease, or neither, put some numbers through your simple statements and calculate the result. This approach fits with the classic definition of analysis: a detailed examination of the elements or structure of something, typically as a basis for discussion. You can’t hope to get the discussion questions right if you don’t do the detailed examination.

If you’re using something like the SchweserPro™ QBank, then you’ve got thousands of questions to attempt to cover the whole syllabus. It’s a big ask to do that, but an effective use of the questions should ensure you cover the majority of every CFA exam topic.

CFA Exam Level II Prep: Mock Exams [PERFORM]

When taking Level II CFA Mock Exams, your focus should be on the Learning Outcome Statements (LOS) from CFA Institute because they detail exactly what you are expected to do on exam day.

Learn How to Take the CFA Exam Level II

There’s a difference between learning the material and learning how to take the exam. Be sure you practice taking the exam in realistic simulated exam conditions in the last four weeks of studying. Mock exams offer realistic simulated exam conditions that can really help you in your last weeks of studying.

CFA Institute will give you one mock exam, and you can purchase others with exam prep providers like Schweser. The Schweser Online Level Il Mock Exam includes an exam sim mode that uses the same interface as the actual computer-based exam. It also includes a multimedia tutorial that takes you through each question and helps you understand where the answer comes from, the calculations required, and what terms they are testing you on. This helps to fill in your knowledge gaps and give you an idea of how you should pace yourself during the actual exam.

If you make a mistake, you can use it to your advantage. You can train your brain to recognize that this is the kind of mistake that can be made. Then, you’re less likely to repeat it. Successful CFA charterholders have told us they spent the entire last month working and reworking exams and focusing on the main issues.

Looking for more help with passing the Level II CFA® exam? Check out our CFA Exam Level II study packages.

Apply Level II CFA Exam Concepts to Real Life

Just knowing the material isn’t enough to pass the CFA exam. You must be able to take the knowledge and apply it to real situations. Most questions are not asking you to regurgitate memorized material. They are asking you to use problem-solving skills and apply knowledge to situations you may encounter on the job.

Many CFA charterholders advise you to always tie back what you are learning to the real world. Saqib Baig, CFA, recommends, “As you are going through the learning outcomes, keep asking yourself questions as to why you are learning this and how you are going to use this in your work.” The more you can make the study material real to you, the easier it will be to remember it.

Following these tips will ensure you are as prepared as possible for Level Il of the CFA exam. Now that you know the best way to study, learn how to prepare an effective CFA Program study plan and pass the CFA Level II Exam. Join Dr. B.J. Tolia, CFA, as he discusses the CFA Level II curriculum, the key differences between Level I and II, and study strategies that have been proven to work.

 

 

Can I pass CFA Level II with Self Study?

Yes, it is possible to pass the CFA Level II Exam with self-study. However, most CFA members strongly suggest that you prepare with a CFA expert who can help guide you through the curriculum and keep you motivated along the way. 

One of the biggest challenges of CFA Exam prep is longevity. On average, it takes 4+ years for a CFA candidate to complete the full CFA program. You should only pursue the self-study method if you are a highly-motivated self-starter who does not want guided instruction. 

Getting guided instruction ensures that you have a CFA expert who knows what it takes to pass the exam in your corner. An expert can help you break down your study routine into specific weekly tasks based on and leading up to your CFA Exam date, and can also provide detailed feedback following your mock exams, and ultimately help you master the CFA curriculum.

Ready To Start Preparing for the CFA Exam?

As you get ready for your next CFA exam, consider making a Kaplan Schweser CFA Level II exam prep study package—complete with classes, study tools, and mock exams—the centerpiece of your mission to earn a passing grade.

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