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Business Insider calls CFA “the most brutal exam” in finance. The exam consists of three levels, each of which must be cleared to become a CFA Charterholder. In the last ten years, give or take half the candidates have failed in each level. This means that any given candidate has a very small chance of success without retaking the exam.

To clear each level of the exam, you'll need to give it your very best.  Here are the three most important tips to help you increase your chances of passing.

Tip #1: Know What You're Up Against 

In May 2022, 19,403 candidates participated in the first level of the exam, only 7,315 of which passed. This gives the first level a passing rate of only 38%, making CFA's first level one of the most difficult exams you can attempt. However, you're naively mistaken if you think you have a 38% chance of becoming a CFA Charterholder. 

According to the average passing rates of the CFA exams in the last ten years, 42% of candidates pass the first level. The second level has an average passing rate of 45%, while the third level only allows around 54% to pass. Each subsequent level also has a prerequisite of passing the previous level before you can sit for the exam. This means you have to pass the levels in the right order.

If you calculate the probability of passing for any candidate, you get 10%. That's it. Only one in ten candidates pass the exam without repeating any level. We're sure you weren't underestimating the exam before either but knowing this should inspire you to prepare harder. It may not be enough, no matter how good you think you are.

Tip #2: Don't Rush Into It

CFA holds the first level of the exam four times a year. It takes up to 60 days to get the results. The second level is held three times a year, and the results are available within 60 days. The third level is only held twice a year, and the results are announced within 90 days.

When you take the level 1 exam, please consider how long you'll need to prepare before applying. You don't have to sit in the next one; you will need more than three months to prepare. Also, don't rush into the second level when you pass the first exam, thinking you'll pass it just as easily. Note that the second level only has a passing rate of 45%, even though 100% of these candidates passed the first level.

The third level has a passing rate of 54%, but do not let that make you think it's easy. People who pass the first and the second level are all highly qualified in financial investment. The third level is still too difficult for 46% of them to pass. Take as much time as you need to prepare for each level and keep your biases in check, so you don't underestimate any level.

Tip #3: Don't Sacrifice Your Sleep

The first and second levels consist of multiple choice questions, while the third level has multiple choice questions along with essay questions. The first exam tests your basic investment analytical skills. The second level measures more advanced skills such as asset valuation, while the third level requires you to masterfully combine all your skills to manage portfolios. Each of these levels requires a combination of knowledge, skill, and cognition. Sleep affects all three of these abilities.

There are two main phases of sleep: NREM and REM. During NREM sleep, your brain permanently stores all the knowledge you gained during the day so you can recall it in the future. This includes all your basic facts and figures. During REM sleep, your brain tries to gain more insight into the skills that you improved upon during the day. This makes you better able to comprehend abstract concepts such as graphs without thinking about them. 

Last but not least, lack of sleep directly and immediately affects your cognition. It makes it harder to process information, which is what you'll need to do at all levels. Preparing is immensely important, but you'll be worse off if you sacrifice your sleep for preparation.

About the Author

FINRA Brokercheck Francisco Faraco is a CFA Charterholder who has also been a Teaching Assistant in Financial Mathematics at the University of Chicago for the Master of Science. FINRA Francisco Faraco’s experience makes him ideally qualified to teach students to pass the CFA exam levels. 



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