For professionals in the finance or investment management domain, the Chartered Financial Analyst (CFA) is one of the most valuable qualifications. This multi-level exam tests candidates on investment tools, valuation techniques, portfolio management, and ethical standards to give them a designation as one of the best professionals in their field. However, with such a huge reputation comes the difficulty of the exam, which makes the scores of the majority of the CFA aspirants sit below the cut-off. To understand the difficulties of its three levels and develop the best possible preparation strategy, they enroll in CFA online courses India.
What are the 3 Levels of CFA?
When you are searching for CFA course details after 12th, you may discover that the CFA exam is conducted at three levels. The following are the three distinct levels:
Level 1 – Knowledge Foundation
The CFA Level 1 is made to test your understanding of investment fundamentals, as it covers topics like ethics, quantitative methods, financial reporting & analysis, economics, equity, and fixed income. Applicants have to face MCQs that focus on recall and basic application of core concepts.
Level 2 – Application and Analysis
After Level 1, Level 2 evaluates your analysis and valuation skills through questions focused on analytical reasoning and problem-solving. This level includes complex topics such as equity valuation, fixed income analysis, and financial reporting.
Level 3 – Synthesis and Portfolio Management
After you clear the CFA Level 1 and 2, Level 3 focuses on portfolio management, wealth planning, and the application of concepts for real-world decisions. Its questions feature a blend of essay questions in one session with item sets in the next one. To ace this exam, students must show analytical accuracy as well as the ability to articulate structured responses in a limited time duration.
What are the Pass Rates Across the 3 Levels of CFA?
To know the difficulty of all three levels of the CFA exam, the best metric is the average pass rate of all three levels. When we consider the average pass rate of the last 10 years, reports reveal the following data:
- Level 1 – 40%
- Level 2 – 45%
- Level 3 – 51%
What are the Difficulties You Face in CFA?
All three levels of CFA have different structures and topics. Hence, there are several separate as well as common difficulties that students face during the exam. These difficulties are what give rise to the need for a better preparation strategy with the best CFA online course. The following are some aspects that give rise to these challenges:
1. Time Pressure
Across all three CFA exams, candidates have to answer a varying number of questions of different forms in different time limits.
- Level 1: 180 multiple-choice questions.
- Level 2: 88 item-set questions.
- Level 3: Essay questions and item sets.
Proper time management is necessary to clear all three levels, as missing out on the questions due to a slow pace can harm your score massively.
2. Ethics
The Ethical & Professional Standards section is common across all three levels and carries a considerable weightage. Hence, ignoring it can prove to be a massive mistake for you and result in lower overall scores, particularly at Level 1 and Level 2.
3. Complexity
It is a known fact that the later level is always tougher than the earlier one, and a primary factor behind that toughness is the complexity of questions. To tackle this complexity, the answers need to show the depths of the concept.
- Level 1 focuses on a broad understanding.
- Level 2 requires deep valuation skills and analytical reasoning.
- Level 3 tests synthesis, communication, and portfolio management.
4. Exam Structure
The difficulty of the three levels is also influenced by the exam structure, which varies massively.
- Item sets of the Level 2 test integrated analysis across multi-part scenarios.
- The requirement of constructed responses in Level 3 demands clarity, precision, and your ability to think like a professional.
What is the Best CFA Preparation Strategy?
Just as with exams like FRM for whose preparation you have to enroll in the best online FRM course in India, it is recommended that you take appropriate coaching for CFA preparation too. This is because all three levels of CFA have a different exam pattern, difficulty level, and concepts. Hence, candidates need to pursue different strategies for their preparation. The majority of the candidates are taught about these strategies during their course for CFA preparation. Below are the best tips to follow during your preparation for each level of CFA:
Level 1
- Start with Ethics: Mastering ethics early during your preparation, rather than leaving it for later, boosts your scoring potential.
- Concept Mapping: Use topic summaries and formula sheets to understand the basics of the 10 subject areas.
- Routine Practice: Solve practice questions and give topic tests to build familiarity with the questions.
- Mock Exams: Give mock exams regularly to practice time management.
Level 2
- Item Set Mastery: Practice for item set questions with focus that form a major part of the Level 2.
- Balanced Revision: Allocate more time to heavyweight topics like Equity Valuation and Financial Reporting, followed by full-length practice sessions weekly.
Level 3
- Constructed Response Practice: Practice writing answers under timed conditions, and make them detailed, just what the exam requires.
- Framing: Frame your answers the way a portfolio manager would.
- Mock Essay Reviews: Get your essay formats reviewed by mentors or peers to enhance your clarity and organization.
- Example: Structure study into phases: first internalize Core Portfolio Management frameworks, then transition to practice essays, followed by mixed testing of both essays and item sets.
Conclusion
Cracking all three levels of the CFA exam can be really challenging due to their pattern, time limit, number of questions, varying forms of questions and answers, and other factors. However, with proper preparation, these factors would be seen as hurdles that are way too easy to cross. If you are looking to get the best preparation for this prestigious exam, then you will find the best CFA online course at Fintelligents.
We at Fintelligents have been training candidates for success through our online as well as offline CFA courses for almost a decade, offering several benefits in the form of a faculty full of experts and an affordable fee.
Enroll at Fintelligents and prepare to clear the CFA with scores higher than your expectations.
FAQs
Q. What is the most difficult level of the CFA exam?
As per the majority of the candidates, Level 3 of the CFA exam is the toughest because of the time and thought needed to construct a perfect answer in the form of an essay.
Q. Is 3 months enough for CFA level 3?
Because level 3 of the CFA is its toughest one, it is generally considered that a candidate should prepare for around 6 months to clear level 3.
Q. Can I clear CFA in first attempt?
Yes, you can clear CFA on your first attempt. Even though doing so can be very challenging, the achievement is still possible by regularly following the appropriate preparation strategy for all three levels.
Q. How long does it take to finish CFA?
Keeping the difficulty and the preparation time required for all the exams into consideration, it typically takes a candidate three to four years to finish CFA.
Q. Is work experience necessary for CFA?
Yes, you need to have a work experience of 4,000 hours or around 36 months in investment decision-making to get the CFA qualification successfully.
