Success is a relative term. We have a benchmark and we draw a conclusion whether we have outperformed or underperformed. If we have outperformed we denote it with success and on the other hand we term it as failure. Should we run behind success? I don't know. Should we run behind excellence? Definitely we should! It entirely depends upon our perspective of seeing things. We all know that Level II is way more in depth as compared to Level I. It requires a lot of understanding as well as retention. Based upon the statistics published by the CFA Institute, on an average 40% of the candidates are able to pass the exam. We must not forget that the 100% appearing have passed Level I and they are well aware of the study routine required by the exam. Yet the pass rate is surprisingly less. We can also interpret it in a way that our chances of passing the exam are 40%. What if we start not to worry about the result? What if we change the benchmark of success from the exam result to something else? What we strive for excellence in spite of striving for success? I know it isn't that much easy but I believe it has a lot of long term implications. I can recall when I came to know that I have passed Level I, the joy was much more related to the fact that I would have the opportunity to learn what I had been cramming and retaining for over 4 months. The beauty which lies with level II is that you just cannot merely rely on retaining the information somehow you've to understand it. This is the best chance we have. We have been given this opportunity to learn from the material. We need to dig ourselves into the books to extract maximum out of them. Unless we do not understand anything we should not move and try to connect things in mind what exactly is going on. Believe me the perspective would shift from just passing the exam to become excellent in what we are doing. Once the paradigm shifts, success becomes something not to be run behind off but the excellence achieved makes success follows us! Therefore dig yourself into the material and try learning the best out of them not because it will help in passing the exam but it will develop the desired skills in us which are not limited to 3rd June but for the rest of our career in finance. In this regard a technique could be to try deriving the formulas. Though it is beyond our scope but if we try we can derive formulas. For instance I had posted a few days back how RI = (ROE-r)xB0. In the similar way P/B = ROE - g / (r-g ) is derived from GGM. If we learn how it has been derived, we won't easily forget it and it will make things simple for us. Alpha as we all know is excess return over required return. I read in my notes that Hedge funds have more focus on Alpha as compared to Beta. I had read alpha in equity a lot of times but couldn't relate it that way. The line helped me out in understanding that CAPM uses Beta as the systematic risk adjusted over the market risk premium. The impact of Beta is already covered in required rate of return when calculating it from CAPM but Alpha is not covered in CAPM that is why it is the excess return over required rate of return. We have been studying Alpha & Beta in our school days together but interestingly for me they are interlinked here too. Digging into this has enabled me to easily remember this stuff and able to relate it. I don't think so I'll forget it... April is approaching and we all would be revising the material. While revising do try to interrelate things so that excellence is achieved.
Good Luck
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