Preparing for the CFA testing process and what to expect at each level

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The process of becoming a CFA involves taking three different examinations. Because each exam is unique, one must prepare for each level differently. (Unplash)

To advance a career in the finance sector, investment world or banking industry, one should consider becoming a Chartered Financial Analyst (CFA). Carrying this title gives credibility with employers and conveys not only expertise in financial matters but also persistence and willingness to work hard.

Make no mistake, the CFA program is no easy feat. Be prepared for a lengthy and challenging testing process. The CFA Institute program requires applicants to show knowledge comprehension, analytical skills and perseverance.

To be in the best position prior to testing, one should enroll in a reputable prep program that includes mock testing. This kind of testing provides a chance to get used to the structure of the test and difficulty of the time limitations, and to test how well one comprehends the information.

The process of becoming a CFA involves taking three different examinations. Because each exam is unique, one must prepare for each level differently. The following information provides a description of what each exam involves and how best to prepare for each.

CFA Level 1

The first test includes 180 multiple-choice questions. The problems are split into two sessions of 135 minutes each. A break between sessions is optional.

The test requires a thorough understanding of the various asset classes, investment tools, ethical standards and portfolio management methods. More specifically, one can expect to see questions about:

  • Economics
  • Quantitative methods
  • Financial reporting
  • Financial analysis
  • Ethical standards
  • Corporate finance
  • Equity investments
  • Portfolio management

When ready for test day, be sure to wear comfortable clothing, bring a calculator and answer every question. There is no penalty for wrong answers.

CFA Level 2

Once the first level testing has been passed, begin preparing for the level 2 test. Start by reviewing level 1 test results to brush up on any areas of weakness.

The level 2 test presents various scenarios, each accompanied by multiple-choice questions. Again, the exam is split into two equal sessions, and a break is allowed between the two sessions.

The scenarios are essentially mini case studies that address real-world issues. The expectation is to solve each scenario using the information taught. In terms of content, this examination covers 10 topics that fall under the following categories:

  • Portfolio management and wealth planning
  • Investment tools
  • Professional and ethical standards
  • Asset classes

Practice is very helpful with the level 2 test. The more scenarios you read about and attempt to analyze, the more familiar the format of the test will become. One method that can help during the test is to glance at the questions before reading the detailed scenario so that you know what to look for.

CFA Level 3

After successfully passing the first two levels of CFA testing, there is only one more level to complete. Here is some helpful information on how to pass CFA level 3.

First, the structure of this exam is different. Be prepared for essay questions in addition to the usual multiple-choice problems. Overall, the focus of this particular exam aims to determine one’s understanding of portfolio and wealth management. Analysis of complex situations will be given with the expectation of being able to draw informed conclusions. The test is split into two sections:

  • The morning session features essay questions with multiple parts that present scenarios to ponder and solve.
  • The afternoon session presents 10 different case statements with multiple-choice questions to answer.

If you work in the financial, banking or investment sectors, becoming a CFA can be a game-changer. By taking a reputable prep course and practicing with mock exams, you can work your way through all three levels and earn your CFA certification in no time.

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