CFA®Study Materials — Exam Levels I, II and III

The top five reasons why people fail CFA exams.

Two things should be obvious here:

The list, as with the majority of posts, is subject to opinion and may vary across candidates.

Besides working through the exams myself, I have spent a great deal of time talking with other candidates about the exams and their preparation.

I like to think I know something about the process, but you always need to focus the study material from your own viewpoint.

The list is composed of things that candidates do across all three levels that make it generally more difficult to pass.

Each level has its own idiosyncrasies and hurdles that may also make it difficult.

The habits listed in this series are not level-specific.

Which CFA exam level is the most difficult? While understanding why each level is difficult and how to approach each in your preparation is important, the type of question brings us to our first reason candidates fail.

1. Too much meta-studying for CFA exam

Candidates love to talk about the exams. They talk about which level is most difficult and why. They ponder the minimum passing score and trends in the pass rate. I have even seen forum posts on the best beverage to drink while studying.

This is all meta-studying or [studying about studying]. Yes, you need to understand the topic weights on the exams. Yes, there are some great tips and tricks out there on how to approach the CFA exams.

The problem is that candidates too easily use this meta-studying as an excuse to get out of actual studying. How many hours have you spent ‘researching’ how the tests are conducted, how to approach each topic area, the earliest one should start studying, or a myriad of other questions about the exams? I have to be careful here.

Your meta-studying is what brought you to the blog and I want you to come back regularly to listen to my ramblings. But I also want you to pass the exams and I have seen too many candidates sabotage themselves by spending too much time on the forums and not enough time actually studying.

Everything in Moderation in CFA exam preparation

As with most habits, the first step is understanding the behavior and approach it with moderation. There is some great advice out there and it can make your life incredibly easier come the first Saturday of December/June.

You need to know the general process involved and the idiosyncrasies within each exam, but you also need to know when to get off the forums and get to work studying. Give yourself an hour or two every week to answer questions about the exams.

You might take a little more during the first couple of weeks to familiarize yourself with a new level and you might take less time toward the end after you’ve learned what you need. The important point is to understand how much time you are spending and to make sure it does not come at the expense of studying.

If you have a specific question about the exams, especially while studying the curriculum, do not stop studying. Write the question down and address it later, after studying.

When looking for the answer to a specific question, try searching for the question using the forum’s search bar rather than making a new post. This will help answer the question quickly and will not bring you back to the post every time someone leaves a reply.

Find a couple of good sites (I hope this blog will be one) that you visit once or twice a week to see if there are any updates.

Finding a new site can be helpful but don’t spend too much time surfing the web for new places to visit.

I used to know a First Sergeant in the Marine Corps, one of the hardest and most admired men I have ever known. First Sergeant had a saying for when someone failed or things didn’t quite work out, as if all failure came down to one motto, and it brings us to the second of five reasons why candidates fail the CFA exams.

2. Lack of planning and burnout

“Prior proper planning prevents p*ss poor performance!” For those that do not know, ‘p*ss’ is an expletive used here as an adjective for how severely you just messed up. Lack of planning may seem like an oversimplification as to why candidates fail the exams, but much of the time it is just that simple.

CFA Institute’s survey gives a hint | 300 hours

Candidates know that it takes an average of 300 hours studying to learn the curriculum and pass any given level. That’s not just some number I pulled out of the air.

Every year, the CFA Institute surveys candidates and every year those passing the exam report that they spent about 300 hours studying. For the most part, candidates understand the time required and most plan to put in the necessary time to pass.

They figure 300 hours divided by 3-4 months is about 20 hours per week studying and they plan on starting in late February for the June exam. But that is about as far as their planning goes.

Life and CFA Program

Then something happens I like to call, “LIFE.” Life is your little sister getting married and you have to fly to Albuquerque for the wedding. Life is first quarter reporting and you putting in 80 hours a week at the office to get client presentations done. Life is your son’s Little League Championship series that takes you to every baseball diamond in the state and out for pizza afterwards.

Life is all the things that get in the way and cause you to deviate from your study plans. Besides the little things in life that come up to detour the best made plans, I always planned ahead for those cabin fever moments.

These are when you have been hitting the books every day for a month, when you have locked yourself away studying for so long that you see the efficient frontier in your sleep. These are the moments you need to step back and take a day or two off of studying or face some serious burnout.

When to start studying for CFA Exam

A lot of candidates and charter holders cringe when I tell them I started studying for the CFA exams in November or earlier, more than seven months before the exam.

When I say I started studying, they assume it was studying as they are used to doing when they start in February or March (studying every day for 15 hours a week until the exam).

When I say I ‘started’ so early, I mean a relaxed schedule of 5-10 hours a week for the first couple of months. Just reading through the curriculum but not worrying too much about problems or the exam.

After the first reading, I would start through it again using study guides and working practice problems. This all gave me enough time to work through the curriculum and not worry about setbacks from ‘LIFE’ or burnout. I could take a week off if I needed to and still get back on schedule without drastically increasing study time.

There is a procedural component of your study planning as well, of which we’ll talk about tomorrow, but this time component is what trips up candidates the most. After all the time spent learning about the exams, after all the money spent on resources, it seems too simplistic that a lack of time is what causes candidates to fail but it’s true. Learn to plan ahead and plan to pass the exams. Thank you First Sergeant. Frequent readers of the blog will recognize this common hurdle that candidates face.

It is a problem all students face. Worst of all, it is not something you can overcome once and not worry about it again. You have to continuously watch for it to keep yourself on course.

3. Difference between active and passive learning.

Passive learning is those activities where you do not participate but really just absorb the material through sensory perception. This includes reading, listening to a lecture or watching a video. Studies have shown that students remember only about 10% to 30% of the study material through passive study.

Active learning, by contrast, is those activities where you engage the material in an interactive manner. This includes discussion, presentation and problem solving. Students are able to remember up to 90% of the material when they use active studying as part of their routine.

Just Reading the CFA Curriculum isn’t Going to Make It

Now that you know the difference, you are probably saying, “Oh crap, I am doing nothing but passive learning!” Don’t be too hard on yourself. Most school systems are built around passive learning (listening to lectures and reading textbooks) and students only grudgingly engage in active learning.

For me, it was only with the realization that the CFA exams were nowhere near as easy as most of my college curriculum and that passive learning was not going to cut it that I made the commitment to active learning.

Its not the easier route, but would you rather spend a hundred hours reading to remember 10 hours of material (people typically remember about 10% of what they read) or would you rather work practice problems for about 11 hours to remember the same 10 hours worth of material?

Practice, Practice and yet more Practice for CFA Program exam

1) Practice problems are the most obvious form of active learning. Make sure you do all the end-of-chapter questions and ‘blue-box’ examples in the CFA curriculum. These are going to be the most closely related to actual exam questions and are pretty close to the same level of difficulty.

The FinQuiz test bank includes almost 10,000 questions created directly from the curriculum and more than 500 item sets. It is a great supplement to the textbook questions and will help avoid boredom from doing the same questions multiple times.

Study groups for the CFA Program Exam

2) Study groups are a good way to discuss and think about the material, but make sure you are efficiently spending your time on the curriculum and not talking about unrelated things that happened over the week. Flash cards are a good resource to use for study groups. You learn first by developing your own set of cards, then learn by working through other group member’s cards as well.

3)Level III candidates: Do not let the essay section surprise you. It can be extremely easy or extremely difficult.

I first wrote about active versus passive learning in a post earlier but thought I would include it in this ‘top 5’ list because it trips up so many candidates.

4. Should I use a third-party prep provider?

This section deals with the planning process, not finding the right time to study but finding the right resources. The big question on the forums is always, “Should I use a third-party prep provider or just stick with the curriculum?” The question goes deeper though to different products and ways to look at the material as well.

Disclaimer: Obviously, we here at FinQuiz have a vested interest in the answer. Our study guides have been developed as a great complement to the curriculum and we’re proud of the feedback we receive every year. That said, this blog is here for all candidates and we want to see you pass the exams regardless. Check out our examples on the homepage or contact us and we can talk about helping you get the most for your time.

Variety is the Spice of Life

Beyond the specific test prep provider, candidates also need to look at a variety of different products. The CFA curriculum at each level is in excess of thousands of pages.

I was always a fan of looking at it from as many different angles as possible. This helped to break-up the monotony and took advantage of the strengths within different media.

CFA Study Guides – two formats

Study guides come in two formats, those based on the specific Learning Outcome Statements and those that are curriculum-based. Some providers reason that structuring the guides on the specific LOS makes it easier to package the material in shorter pieces.

FinQuiz has taken a different approach, developing curriculum-based guides as a complement to the curriculum instead of as a substitute. By following the curriculum, the guides are more condensed and focus on those areas that give candidates the most problems.

Some candidates completely ignore the curriculum, opting instead to only read study guides. Granted, this cuts down on the time spent to get through the study material but you are sure to miss some points.

As condensed notes, the study guides are not going to include 100% of the testable material in the curriculum. If the guide only hits 90% of the material and the candidate only retains 80% of the guide, then their score is already maxed out at 72%.

This is why FinQuiz feels that a complement to the curriculum is more appropriate than a substitute.

Flash Cards for the CFA Exam

Flash Cards are the most appropriate for focusing in on those last remaining areas in which you are having trouble or keeping those important formulas and processes fresh in your mind. I also like flash cards for their portability and ease of use during short periods. We get (2) fifteen minute breaks during the day, not really enough to open up the books and start a new section but plenty of time to go through 10 cards.

You can easily buy or borrow cards off the internet. Most providers sell sets for around $125-$175 or someone in your social network probably has some you could copy.

The best way, though, is to make your own cards. It may take a little longer, but they will be customized for your learning and will provide the opportunity to write out the material.

CFA Exam Videos

Videos are a good way to look at the study material from a different format. The majority of your studying is going to be through reading a section and answering problems so it is nice to take a break every once in a while and have someone explain the curriculum to you. This is especially useful for some of the more complicated sections where a live example might help.

While FinQuiz does not yet offer videos, there are many available on YouTube and can be found through a simple search.

CFA Exam Test banks

Test banks include thousands of problems to work through and are a great complement to those in the official curriculum.

Working practice problems are really where you need to be focusing your time because the retention is so much better using this active learning method than simply reading the material. Candidates need to work through all the end-of-chapter questions and ‘blue-box’ examples within the curriculum.

This is going to be the closest to the style and difficulty that you’ll see in the exams. The few hundred problems included in the curriculum really isn’t enough to prepare for the exams, making test banks absolutely necessary.

When working through a set of questions, don’t just score your results at the end of a study session.

Go back through the questions. Figure out why you missed those incorrect answers and make sure the correct answers were from an understanding of the material and not simply a lucky guess.

Practice Exams for CFA

Mock Exams need to be a part of your study program so you are not surprised by the six-hour testing marathon in June.

Many candidates handle their studying exclusively in short, one-hour chunks then do poorly on the exam because they are not prepared for the level of mental fatigue.

Further, mock exams force you to answer problems across the curriculum instead of only looking at specific sections.

Facing a test of the entire curriculum is much different than looking at each section immediately after reading over the topic area, make sure you are prepared.

Too many candidates rely solely on the official CFA curriculum without taking advantage of other available media and resources.

Besides offering different approaches and advantages specific to each media, using different resources are about the best way possible of avoiding burnout while studying for the CFA exams.

Look through the free examples that many third-party providers offer or ask other candidates which provider they used. The incremental costs to using a few products are well worth the expense to avoid having to retake the exam.

5. Not all topics are created equal

This hurdle could just as easily have been titled, “I’m an ethical person, so why study ethics?” While the material on Ethics and Professional Standards is not the only one neglected by candidates, it is probably the most avoided.

Sure, you need to have a good understanding of the entire curriculum but a look at the topic weights provided by the Institute makes it clear that some topics are a source of some major points.

CFA exam Ethics, the easiest and most difficult topic on the exams

Candidates have a big opportunity with the ethics section though it still presents a problem for most. The topic area is tested at each level and is worth at least 10% of your exam points.

The opportunity comes in the fact that the topic is the only one that really does not change much as you progress. You’ll see a couple of additional sections but these are relatively secondary against the core Code and Standards, which do not change.

For candidates that give the topic its due at level I, the next two levels are that much easier.

The problem with the ethics material is twofold. Some candidates consider themselves to be fairly ethical people and so think that the answers on the exam will be intuitive.

They neglect the topic and end up failing on the exam. Other candidates read the material, to the point of memorizing the Code and Standards, but neglect to do practice problems.

There are two types of ethics questions on the exam, those with no answer and those that seem to have two correct answers. You absolutely must practice the ethics problems provided by the Institute at the end of the chapters.

You’ll be surprised by the level of ambiguity in some of the problems and how minute details can make the difference between one answer versus another. Don’t let the first time you are surprised by this be at the exam.

You need to know Financial Reporting & Analysis for the CFA designation??? Who Knew?

If not of equal importance to the ethics material, I would put FRA a close second. Unfortunately, a lot of candidates avoid this section as well. The material, much of it focused on accounting issues, may not be as interesting for some.

It can also get extremely complicated and detailed on the level II exam.

Anyone that works in the industry, whether a charter holder or not, will tell you that understanding the financial statements is of the highest priority. As an analyst, you will need to develop models and an expert knowledge of how the company is reporting its business and how it all flows together.

Spending extra time on the material will not only help you pass the exams, it will make your life so much simpler further down the road.

Equity and Fixed Income: The fun parts that aren’t so much fun anymore

Many candidates start the path to the charter because the love analyzing investments, whether in the equity or fixed income market. When they realize that it is a little more than just calculating the price-earnings ratio for the stock everyone is talking about… it becomes less fun.

The two topics can get extremely formula-intensive and most candidates only have experience in one of them. Avoid the temptation of only studying the topic in which you currently work or in which you think you want to work.

First, you’ll need the points from each section to pass the exam. Also important though is the fact that you never know how your career will unfold or when you might want to work in another asset class.

Each level has its own idiosyncrasies and no one topic area will get you through every exam. The four topic areas above are extremely important but you still shouldn’t neglect the other five topics.

Other posts on the blog talk about specific strategies for each level and can help you further focus your study plans.

Are there any hurdles to passing the exams that I forgot? What tripped you up the most? Let me know if you have any questions about the last five posts.

‘til next time,

happy studyin’

Joseph Hogue, CFA

What to do if you fall behind in studying for CFA exams?

So what do you do if you’ve lost some valuable time studying for the exam? First, don’t assume that you can’t still hit that 300-hour study target. With eight weeks left, you could start now and spend six hours a day, six days a week and still make it.

A Scientifically-Proven Way to Study for the CFA Exam

The phrase ‘study smarter, not harder’ is thrown around a lot but candidates may not be taking the advice to heart. Studying upwards of 300 hours for the CFA exam is hard enough but even that may not get you closer to the CFA designation if you’re not retaining the information. You truly do need to master the material in order to recall it on the exam and you won’t be able to do that by just reading through the curriculum.

An Overlooked Benefit of the CFA Exam

CFA exams are truly the great equalizer! Some of the candidates pulled up in BMWs and Lexus, pulling off their designer sunglasses before entering the building. Others pulled into the parking lot in things that may once have been considered cars, but are now a loose compilation of spare parts. Whatever your economic situation in life, you can’t BUY the CFA charter.

Books to Read when You’re Not Studying for the CFA Exam

Studying for the December CFA Program exam is over and most candidates haven’t yet started studying for the June exams. What does a motivated CFA Program candidate do to pass the time when there’s nothing to study? Check out the book ideas below to keep your skills fresh and get ahead of the pack while you’re waiting for the next CFA Program study season.

Studying for the CFA Exam without knowing you are studying

I always liked to start early and set a relaxed CFA study schedule but I’m not going to tell you that you need to get busy studying immediately.What I can tell you is that there is a way you can actually keep your skills fresh while waiting for later to really start studying.It’s a little thing I like to call stealth studying and everyone should work it into their daily routine.

5 Things I Wish I Knew about CFA Level 1 Exam

I may be wrong and it just may be my cynical side but most public education seemed to me more about getting grades than learning. You showed up, took the tests and that was it. And the tests really were not that difficult. School was fairly easy, even up to my bachelor’s programs. Sure there were some tough spots when I would put off a semester project but a couple of late nights and it would be easy again. That’s not the CFA exams and most people get this rude awakening in Level I.

How to Pass the CFA Exams – A Basic Strategy

We have covered strategies and suggestions for level-specific studying in prior posts. Each level has its ‘core’ topics and should be approached in a way to maximize points. With around 50% of candidates failing any given level each year, you can’t afford to let easy points go by not studying as efficiently and effectively as possible. Fortunately, there are also strategies and suggestions that will carry you through all three CFA exams. Some of these ideas are general ideas for effective studying while others are specific to the CFA curriculum and testing.

100 hours of CFA exam study in 3 Weeks!

Studying 100 hours for the CFA Program exams, or even more, in three weeks may not be a problem for some candidates. If you can put other classes or responsibilities aside for a few weeks while you cram for the exams, then it doesn’t even amount to a full-time schedule. Other candidates are not as fortunate. Devoting all your time to the exam isn’t possible when you have a full-time job, a family or a full schedule of college courses. But you can still get in another 100 hours of studying before the exams, picking up a ton of additional points and maybe putting you over the pass-no pass level.

CFA Curriculum Warning: Do Not Neglect

The actual length of the CFA curriculum varies a little each year but it’s generally between 2,500 and 3,200 pages. When you get the books in the mail, or receive the digital version, that may seem like a monstrous task. Over the three years of studying for the exams, I think my upper body strength grew just as much as my financial knowledge just from carrying the books around. Study guides meant to substitute for the curriculum vary but generally range between 1,400 and 1,700 pages. At under two-thirds the length of the official curriculum, it seems like a no-brainer and I know many candidates who have only rarely even peaked inside their curriculum books. And many of them are still candidates.

Top 9 CFA Level 1 Formulas | Must read

Peeling back the cover on your Level I CFA Program books can be a shock at first. Thousands of pages and hundreds of Level I CFA Program formulas sit in front of you and can seem overwhelming. Before you freak out, it’s not really so bad. While formulas become crucial on the CFA level 2 exam and its quantitative focus, the formulas on the first exam are much more about learning relationships and the process. Learn the ‘why’ of the formula and you’ll remember how to work it on the exam easily.

CFA Exam Results, What to Tell the Friends and Family

If you are part of the approximately 50% of candidates that do not pass the exams each year, there are a thousand questions and doubts swimming through your head right now. What did I do wrong? Should I try again? Is it worth it? We talked about these questions in another post, but one of the most stressful questions is going to be, “What to tell friends and family?” You have sacrificed so much of your time with them leading up to the exam and they have supported you all the way. How do you face the embarrassment of telling them you failed the exam? Most likely, few have faced anything as challenging as the CFA exams and do not understand how half the candidates taking a test could get washed out.

This Person Will Keep you from Passing the CFA Exams

Your greatest hurdle preparing for the CFA exams is not going to be your new job, your newborn that wants 100% of your attention, or giving up any semblance of a social life. As cliche as it may be, your biggest challenge for passing the exams is YOU. You are going to get in the way of earning the charter by being lazy and by letting fear keep you from doing what needs to be done. Did He Just Call Me Lazy?? By lazy I don’t mean everyone is slothful vagrants, sitting around doing nothing. I mean that it is easy to lose focus and your commitment to the process.

Will the CFA Charter Get Me a Job???

This is probably the question I see most often from candidates. The CFA exams can be extremely demanding and candidates want to know that their efforts will be rewarded. There are two problems with the question though. First, it always seems to get asked most in the months leading up to the exam. It isn’t a legitimate question as much as it is fear of failure trying to give you a reason to give up, something I addressed in detail in a prior post. Ask yourself if you are dedicated enough for the exams before you begin level 1 (and at latest maybe before level 2 now that you know what you are up against), then stick to your decision. Before I address the second problem with the question, we’ll cut to the answer.

CFA® Program Study vs. Family

The title above is the title from a recent forum post on the LinkedIn group. While the underlying subject of juggling a personal life and family with the CFA exams is a constant topic, I thought the title was interesting and brought back memories of managing my own social life with exam preparation. I thought the forum title was interesting because it is how many candidates feel about studying for the CFA exams and…well, everything else. It seems that preparing for that 6-hour monster in June puts you at odds with everything else; your family, your friends, anything you previously enjoyed.

How does the CFA Program Exam Stay Current?

I get questions occasionally about the CFA Program exam and how the CFA Institute updates the exam to stay relevant in the industry. The curriculum across the three exams does change regularly with the addition of new readings while others are dropped each year. Ten topic areas remain but the emphasis and material within each may change. CFA Institute uses a committee of practicing CFA charter holders and staff to design the curriculum with input from other charter holders through an annual survey. The education advisory council (EAC) provides oversight and guidance to the process of development.

CFA Exam Results Coming Soon, What if…?

Results for the level I and II 2018 CFA exams are coming up (August 14th) with the level III results out on August 28th. CFA exam results are emailed out with the title, “your CFA Exam Results” and many will be too afraid to open the email immediately. Posts on the results and how to prepare range from the strictly informational to the frantic. I saw one post recently that suggested that the candidate visualize opening the email and seeing bad news!