Top 2 CFA level 3 Hardest topics

No I am not going to give you lots of introduction & context and then make you wait till the end!

Quite the opposite! As veterans of the CFA program, and completing the level 2 exam. You should understanding there is nothing difficult anymore. The real difficulty is over at level 2.  Infact now is the good part, the real stuff of bringing everything together.

CFA level III by far for me was the most enjoyable level, because it was practical. I used all the concepts learnt at this level till date.

So lets get cracking!


Contents

  1. The Topics at CFA level III- What’s different?
  2. The most difficult CFA level III topics  & Why?
  3. How to prepare for CFA level III
  4. How difficult is the CFA level III Exam
  5. Conclusion

The Topics at CFA level III- What’s different?

Well CFA level III is like shifting gears from low RPM at low speeds to high gears. Its more stable and smooth.

CFA LevelIIIIII
Ethical & Professional standards15-20 %10-15%10-15%
Quantitative Methods8-12%5-10%0
Economics8-12%5-10%5-10%
Financial statement analysis13-17%10-15%0
Corporate Issuers8-12%5-10%0
Equity Investments10-12%10-15%10-15%
Fixed Income10-12%10-15%15-20%
Derivatives5-8%5-10%5-10%
Alternative Investments5-8%5-10%5-10%
Portfolio Management & Wealth Planning5-8%10-15%35-40%

CFA level 1 and level 2 was like intense probation, teaching you everything under the sun in finance. Now its time to take decisions. Don’t get fooled by the same names of the subjects. The name might suggest that its economics again or fixed income again.

You just need add the word “ Portfolio Management” after every asset class. For example

  • Fixed Income to Fixed income portfolio management
  • Equity to equity portfolio management
  • Derivatives to derivatives in portfolio management

& the last subject portfolio management includes

  • Individual portfolio management
  • Banks
  • Institution and foundations
  • Insurance companies

So Whats new?- Well for me, everything was new. Why?

  • Because now I don’t think about a topic individually but learn about issues of each type of investors.
  • I need to understand complications of each type of investors
  • Remember logically the use of alternative investments in the over all portfolio
  • Not to mistake to add more equity in a business mans portfolio.

This level will force you to think like a portfolio manager.

The most difficult CFA level III topics  & Why?

In my opinion in total of 16 study sessions, the most difficult readings categorized basis either the volume of content or technicality.

  • Length and Volume-

Portfolio Management & Wealth Planning hands down! 7 freaking study session. By now you know how usually big a study session can be. As low as 1 reading and as big as 4-5 readings. In case of this subject, it is around 14 readings. So the length does create some endurance tests.

Another challenging part is practice in this topic, because it requires a lot of written essay practice. Which can be time consuming.

  • Technicality & Perspective

CFA level III can be challenging for some, due the sheer lack of experience. If you have never invested, never worked in asset management industry. Then sometimes it feels imaginative than relatable.

In this perspective in my opinion at least since I didn’t come from the background of fixed income. It was Fixed Income portfolio management & to some extent derivatives & currency management.

You tend to realise how big the Fixed income market is in CFA level III.

How to prepare for CFA level III

In my simple experience of giving all the levels in a single attempt and for Level III like wise. My simple tips are:

  • Content- Please for gods sake refer the CFA curriculum. You need those blue box cases in this level because you have to write essays. The more you read them, the more you understand how to pen it down.
  • Start Way Early- Please take this as a strong advise. The content is lengthy, and you cant nail it in three months. Plus understand that now you are competing with the best. All the novice players are out in level 1, some amateurs in level II & now the ones that survived are serious candidates.
  • You just need prepare better than your friend- this is what gave me the peace of not overthinking about the results. I just need to do slightly better than the one sitting next to me. So if you keep your spirits and discipline intact then you will crack it.
  • Don’t Miss Questions- This level is about statistics and probability. Not completing all the questions means, you are gone. Or at least with high probability. So a single best strategy is to finish the paper
  • Balance the Practice- Don’t just practice essay, but keep a balance. The level II format should be practiced daily and essay type atleast weekly. Also don’t be lazy not to practice the essays after all. Trust me, essay writing is difficult and needs to be concise.

How difficult is the CFA level III Exam

Statistically, the level III exam is of course has the highest pass rates. But don’t forget if 10 people started at level 1, then by now only 2 or 3 are left to compete. So it just means that the game is filtered and hence the quality of students or candidates is good.

But for me personally, I passed the CFA level III exam with much more ease than Level II. Level II was like a 5 Km tempo run, level III was like a 15 k easy pace running. So its endurance.

Conclusion

Biggest mistake is to lose focus and feel tired. Look at CFA level III as the steppings tone of your career rather than the end. The feeling of it being the last level, makes it even more delusional difficult.

Also please don’t just learn it for the exam, Level III concepts will stay with you forever. It will help you in making stupid choices in personal finance

Best of luck!

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ALLEN ARAVINDAN,CFA

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