CFA is a widely recognized investment management designation globally. Numerous finance enthusiasts worldwide enroll in CFA to be a part of the charter and excel in their field of interest. But it is not everyone’s piece of cake. CFA is a challenging exam; only a small percentage of people pass all levels. However, when starting, the most common question is, “How hard is CFA level 1?”
Some people believe it is the hardest, but statistics show that most people pass level 1 tests compared to levels 2 and 3.
So, let’s tell you the CFA level 1 summary and how difficult is it to pass it.
What is CFA?
The CFA® (Chartered Financial Analyst®) charter is a postgraduate designation certifying the competence of financial analysts. The CFA institute comprises over 167,000 professionals and societies globally.
Universities, programs, and regulators recognize this certification in more than 30 countries and territories. It enables the candidates to connect with their peers around the world and get better job opportunities.
Levels of the CFA Exam
The CFA exam constitutes three levels (level 1, level 2, and level 3) that test your knowledge of different skills and tools. These tests are the key metric for evaluating your financial analyst competency. Most people take around 4 to 5 years to pass all three levels.
The program is basically a self-study program with a generalist approach to valuation, investment analysis, and portfolio management. We will discuss the CFA exam level 1 course content later in this article.
How Hard is CFA Level 1?
Some candidates believe level 1 is the hardest, while others say it is the easiest step of the ladder; the exam gets harder in level 2 and level 3.
The average overall pass rate for all three CFA levels is only 11%. Around 10-20% of candidates do not appear for the exam due to anxiety and cold feet.
Statistics from 1963 to February 2023 showed a 41% average Level 1 pass rate. However, the passing rate dropped to 38% in February 2023.
So, it would not be wrong to say that CFA is setting the bar high with even tougher question papers now due to increasing competition.
Course Content for CFA Level I
The CFA exam tests the candidates on the following skills and subjects:
- Alternative Investments
- Corporate Finance
- Derivative Investments
- Equity Investments
- Ethical And Professional Standards
- Financial Reporting And Analysis
- Fixed Income
- Portfolio Management And Wealth Planning
- Quantitative Methods
Equity investments, financial reporting and analysis, ethical and professional standards, and fixed income are the most heavily weighted sections in the Level 1 exam. So, giving a little extra preparation time to these CFA level 1 notes topics is always safe.
CFA Exam Criteria
If you are looking forward to taking the CFA exam soon, you must meet the criteria set by the CFA institution. You must have:
- A bachelor’s degree from a recognized institution OR be a final year student completing the degree within 11 months
- 4,000 hours of work experience related to investment decision-making process completed in a minimum of 36 months
- A valid passport
When Can You Take the CFA Exam?
The CFA institute conducts the exams in June, but you can also take the Level 1 exam in December. You cannot retake an exam at least 6 months after the first attempt. Many students give up after failing their first attempt to avoid waiting for a long time and investing 300 hours of study again.
Also, did you know CFA Institute provides a free mock exam CFA level 1 for candidates? If you did not, now you know about it!
How much time does the Level 1 Exam Take?
CFA exams typically take 4 to 6 hours, and the Level 1 exam is around 4.5 hours, split into two 135–minute sections (with an optional break). Candidates must complete 180 questions during the period.
The exam is split into as follows:
- First session (135 minutes): 90 multiple-choice questions on financial statement analysis, quantitative methods, ethics & professional standards, and economics.
- Second session (135 minutes): 90 multiple-choice questions on corporate issuers, fixed income, equity, derivatives, portfolio management, and alternative investments.
The test uses two question formats:
- Sentence completion with three choices
- Questions with three choices
The questions might include terms like ‘most accurate,’ ‘most appropriate,’ ‘most likely,’ ‘best described,’ ‘least appropriate,’ ‘least likely,’ ‘least accurate,’ or ‘least appropriate.’ But you will not see ‘except,’ ‘true,’ or ‘false’ in the questions.
Candidates must not spend more than 90 seconds on each question to ensure they are able to complete the test. Also, answer all questions as the exam carries no negative marking.
CFA Level 1 Exam Passing Criteria
The CFA institute does not openly share a MPS (minimum passing score), but research shows it is between 60 and 70 percent.
Candidates do not receive a detailed marking card indicating their score in every subject. Instead, the result reads ‘Pass’ or ‘Did not pass’ depending on the MPS. However, candidates receive a summary of their performance in each topic to help them prepare better for the next attempt.
The score of each topic is expressed as:
- Less than 50 percent
- 50 – 70 percent
- More than 70 percent
To pass the exam, candidates can only score less than 50% in one or two of the topics (least weighted). You must aim toward gaining more than 70% in all topics.
Now that you know how hard is to CFA level 1 and the minimum passing score, let us give you a few tips on passing CFA on the first attempt.
How to Pass the CFA Level 1 Exam?
Create a Study Plan
While you might think it is the obvious part of preparing for a tough exam life CFA, many people forget this step and opt for an ‘as much as possible’ approach. However, a CFA requires you to create a proper study plan, allocating specific time to every aspect of exam preparation. You must create your study plans 6 to 9 before appearing for the Level 1 exam.
Know the Material
The course content for the CFA exam comes from the CFA institute’s curriculum. You can find all the study material on their official website to prepare CFA level 1 notes. It must be your primary resource to prepare for the exam, followed by others for additional help.
Give at least 300 Hours to Exam Prep
Candidates who have prepared and passed CFA have one thing in common: they prepared for at least 300 hours before appearing for Level 1. Divide the time into 90–120 hours for reading and coursework, 120–150 hours to answer practice questions, and 60 hours for practicing CFA level 1 mock exam.
Prepare According to Topic Weightage
As you know, some topics have a higher weightage in the CFA Level 1 exam than others, so it is best to give them more time. It will allow you to prepare for these topics better and boost your chances of scoring less than 70%.
Focus more on Concepts
It is no secret that the CFA exam is all about numbers, but you can only ace these calculations if your concepts are crystal clear. Before jumping to calculations and mock exams CFA level 1 right away, take your time to understand the concepts. Familiarizing yourself with the underlying ideas is essential to scoring well.
Befriend your Calculator
Your calculator is the most important tool in the examination hall, and you must know how to use it adequately. CFA institute allows candidates to use Texas Instruments BA II Plus/Plus Professional and Hewlett Packard 12C and special edition calculators. If you are not adept at using yours, it can harm your score.
Enroll in a Preparation Course
Enrolling in a CFA preparation course can help you prepare better and pass your exam on the first attempt. The institutes have years of experience that allow them to provide strategies and tips to perform better in the exam.
Tips for the Exam Day
- Dress comfortably
- Check your calculator
- Sleep well
- Drink plenty of water
- Be confident
- Keep an eye on the watch to not miss questions
What if I Fail the CFA Level 1 Exam?
Though you must prepare to pass the exam in the first attempt, over 50% of the students fail in the CFA level 1 exam. And if you do not pass it in the first attempt, gear up and get ready for the second attempt.
- Design a stricter schedule with more study time
- Analyze your performance and focus on weak areas
- Give at least 300 hours if you did not do it in the first attempt
- Fix your weaker concepts
- Practice CFA level 1 mock exams more
- Enroll in a CFA preparation course to understand your weaknesses better
The Bottom Line
CFA is a widely recognized investment management designation globally, and thousands of finance enthusiasts take CFA exams every year. As a beginner, most people wonder how hard the CFA level 1 exam. CFA level 1 is considered the toughest; Statistics from 1963 to February 2023 showed a 41% average Level 1 pass rate. However, the CFA level 1 summary shows the passing rate dropped to 38% in February 2023. Candidates who have passed CFA level 1 suggest studying at least 300 hours, focusing more on highly weighted topics, and enrolling in a CFA exam preparation institute.
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