The CFA Charter is a prestigious designation for financial investment advisors, but passing the CFA Exams is challenging. The exam has three levels, and most people study for each level for at least three months (and often a lot more than that!). In addition to passing the exams, individuals must accrue 4,000 hours of relevant work experience and possess a bachelor’s degree to earn the Charter.
Here is everything you need to know about the CFA Level 1 Exam and how to approach difficult questions.
The CFA Exam Material
The CFA Institute administers and manages the CFA Exam. The exam’s substantive areas include Accounting, Statistics, and Economics, plus important topical areas for each critical asset class. However, the most significant weight is placed on Ethics, which can consist of up to 20% of the Exam.
Level 1 tests foundational information, while Level 2 requires an analysis of problems. Level 3 tests how to apply concepts to real-world decisions. Exam questions are difficult, but here are some tips to help you approach challenging CFA Level 1 questions:
1. Be Wary of Two Choices Saying the Same Thing
Many CFA exam questions try to confuse test takers by having answers that say similar things. Examples include figuring out long and short positions, in-the-money configurations, and questions that involve foreign exchange concepts.
Occasionally, CFA exam questions may have two answers that result in the same investor position comparative to market movement. Both choices are probably wrong since they both cannot be the correct answer. Try to eliminate solutions that convey the same thing.
2. Be Cautious With Absolutes
If a CFA exam question contains answers with absolutes, pay close attention to the question. Reread the question to see whether you may eliminate absolute solutions, given the strong statement. Examples of absolute words frequently used on the CFA exam include:
- never
- always
- all
- only
- just
- none
- not
- must
- every
- no
However, not all answers that contain absolute words are necessarily wrong. You should simply pay close attention to these words and whether they can give you a clue to the correct answer.
3. Don’t Use Concepts and Definitions Outside the Exam Curriculum
The CFA Exam requires a great deal of studying for a reason: each question on the Exam is based only on the CFA curriculum, with no outside sources introduced. Answer the questions with the CFA materials in mind, not based on external knowledge you obtained in college or the workplace. The CFA Exam tests you on specific materials applied in a particular way.
4. Don’t Be Afraid To Change Your Answer
Most people think you should trust your first gut feeling when it comes to answering multiple-choice questions. However, experts agree that this notion is misleading. In fact, studies show that individuals who changed answers on an exam ended up with higher test scores.
5. Study With a CFA Exam Prep Course
Are you planning on taking the CFA exam soon? UWorld Finance provides exam study materials that are proven to help test takers retain knowledge better. Our interactive study techniques can help you master the CFA material. Start a free trial and find out more about our CFA Level 1 Online Learning Tools.