CFA Level 1

Written by: Nik Ventouris

Last updated:

The Chartered Financial Analyst (CFA) Program is a globally recognized certification offered by the CFA Institute.

The first step in this journey is passing the Level 1 exam, which is meant to lay the groundwork for the more advanced levels that follow.

This CFA Level 1 guide offers a detailed overview of the CFA Level 1 exam, breaking down its structure and offering valuable insights and strategies that you will be able to utilize while preparing.

CFA Level 1 Exam Structure

The Level 1 CFA exam is a rigorous assessment that tests your knowledge and comprehension of various investment tools and principles. This exam is designed to evaluate the fundamental competencies required of an entry-level investment professional.

The Level 1 exam comprises 180 multiple-choice questions, distributed evenly over two sessions. Each session lasts approximately 2 hours and 15 minutes, with a brief optional break between the sessions to help you relax and regather your focus.

First Session

The initial session of the exam covers 90 questions, and primarily focuses on the following subjects:

  • Ethics & Professional Standards
  • Quantitative Methods
  • Economics
  • Financial Statement Analysis

These topics test your understanding of the basic ethical principles in investment and your ability to analyze and interpret relevant data.

Second Session

The latter session of the exam consists of 90 questions as well. Having said that, readers should keep in mind that this session delves deeper into more complex topics. Some of these include:

  • Corporate issuers
  • Equity
  • Fixed income
  • Derivatives
  • Alternative investments
  • Portfolio management

These subjects aim to assess your knowledge of different asset classes and your ability to manage investment portfolios effectively.

Managing your time efficiently is vital for the CFA Level 1 exam. Ideally, you should allocate about 90 seconds per multiple-choice question. Having said that, keep in mind that, depending on your understanding of the topic and the question’s complexity, you might need more or less time.

Recommended Course

For all of your CFA Level 1 exam needs, StateRequirement recommends Kaplan’s preparation materials.

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Multiple-Choice Exam Question Format

Each multiple-choice item on the CFA Level I exam is structured with a stem (a question, statement, or table) and three answer choices (A, B, or C). There are two basic formats used:

  • Sentence completion with three unique choices: For example, “If the 12-month continuously compounded return of a security is 9%, its associated 12-month holding period return is closest to: A) 8.62% B) 9.38% C) 9.42%”
  • Questions with three unique choices: For instance, “Which of the following is most likely an assumption of technical analysis? A) Security markets are efficient B) Market trends reflect irrational human behavior C) Equity markets react quickly to inflection points in the broad economy”

The Level I CFA exam avoids using ‘except,’ ‘true,’ or ‘false’ in items and minimizes the use of ‘not’ whenever possible. When necessary, question stems will include one of the following qualifiers: ‘most likely,’ ‘least likely,’ ‘best described,’ ‘most appropriate,’ ‘most accurate,’ ‘least appropriate,’ or ‘least accurate.’ Each question stem supports only one item on the exam.

Moreover, all questions carry equal weight, and there’s no penalty for incorrect answers, so it’s in your best interest to attempt to answer all the questions.

Interested in having a more in-depth look at the format? Have a look at our CFA Level 1 Mock Exam article.

Exam Topics

The Level 1 CFA exam covers ten key areas. We have provided a breakdown of these below:

Session 1

  • Ethical and Professional Standards (15-20%): This segment tests your understanding of the ethical principles, standards, and practices that guide the investment profession
  • Quantitative Methods (8-12%): This section assesses your ability to use statistical techniques and time-value-of-money concepts
  • Economics (8-12%): Here, your understanding of micro and macroeconomic concepts is tested
  • Financial Statement Analysis (13-17%): This part evaluates your ability to analyze financial statements, interpret financial ratios, and understand the impact of taxes

Session 2

  • Corporate Issuers (8-12%): This section assesses your understanding of corporate governance, ESG investments, and corporate investment decisions
  • Portfolio Management (5-8%): This section tests your knowledge of portfolio risk and return, portfolio planning, and execution
  • Equity Investments (10-12%): This part assesses your ability to value equity securities and understand their risk and return characteristics
  • Fixed Income (10-12%): This section tests your ability to analyze fixed income securities and manage interest rate risk
  • Derivatives (5-8%): This section evaluates your understanding of derivative markets and instruments
  • Alternative Investments (5-8%): This part assesses your knowledge about various alternative investments, including real estate, private equity, commodities, and hedge funds

Some introductory financial concepts and essential building blocks for later learnings, such as the time-value of money, basic statistics, microeconomics, and introduction to company accounts, have been moved to the pre-read section.

This measure is designed to provide more exam time for advanced practice concepts and practical skills modules. However, candidates can access this pre-read material at no additional charge to fill knowledge gaps and assess their readiness for the Program.

Interested in getting started? We recommend Kaplan’s CFA level 1 learning materials and study resources.

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Alternatively, you can have a look at our CFA Level 1 Notes article.

How to Prepare for Your CFA Level 1 Exam

Passing the CFA Level 1 exam demands a thorough understanding of various complex topics. Thankfully, several resources can aid you in this journey.

Below are a few important resources that we recommend you use while preparing:

  • CFA Program Curriculum: Your study journey begins with the CFA Program Curriculum; this is a comprehensive resource that gives you a detailed guide of all the topics you’ll be tested on. It helps you grasp core concepts and ensures you’re well-versed with all the necessary areas of study
  • CFA Institute Learning Ecosystem (LES): A part of the digital solutions offered by the CFA Institute, the LES provides a range of study tools that are integral to your preparations. These include customizable study plans, practice questions, and mock exams that simulate the actual exam environment
  • CFA Program Approved Prep Providers: For additional study materials that can complement your main resources, we recommend purchasing a CFA course and/or study package from an approved provider. These can go a long way in helping you pass on your first attempt, and include a plethora of study guides, video lectures, and practice questions

Additional strategies that we recommend you follow in order to improve your chances of success include:

  • Create a Study Schedule: Crafting a study schedule that allocates ample time for each topic is critical. Keep in mind that successful candidates report studying on average over 300 hours for each level of the CFA Exam
  • Form or Join Study Groups: The power of collective learning cannot be underestimated. Joining study groups allows you to engage in productive discussions, clarify doubts, and view various topics from different perspectives
  • Leverage the Power of Mock Exams: Mock exams are a vital tool to gauge your preparation levels. They familiarize you with the exam format, enhance your time management skills, and highlight the areas you need to concentrate on

With the right resources and an effective study strategy, you can navigate the path to the CFA Level 1 exam with more confidence and ease. Remember, consistency is key in this long, rewarding journey.

Exam Day Tips and Strategies

As a final note, we have provided a few tips and insights that will potentially help you avoid unnecessary errors during your exam.

All in all, you will want to keep in mind that:

  • Questions related to Financial Statement Analysis are primarily based on International Financial Reporting Standards (IFRS), unless otherwise specified. If a question is based on U.S. GAAP, it will be explicitly stated in the question
  • Your calculator will be an essential tool during the exam. Ensure that you’re comfortable with all its features required to address the learning outcome statements (LOS)
  • Dress comfortably for the exam. There’s no dress code, but dressing in layers can help you adjust to varying room temperatures

Note: If you need assistance during the exam, don’t hesitate to seek help from the proctors. Continue working on your exam until assistance arrives to make the most of your time.

Is the CFA Level 1 Exam Right for You?

Deciding to take on the CFA Level 1 exam is a significant commitment. It requires not just an investment of time and effort, but also a deep passion for finance and investment.

If you’re confident about meeting the enrollment criteria and are ready to undertake this challenging yet rewarding journey, registering for the CFA Level I exam could be the first step towards a successful career.

Remember, passing the Level 1 CFA exam is an important milestone, but it’s only the beginning of your journey. Upon passing this exam, you’ll be ready to move on to the Level 2 and Level 3 exams, bringing you closer to earning your CFA charter.

Keep your goals in sight, stay committed to your study schedule, and you’ll be well on your way to achieving success. Good luck with your CFA journey!

CFA Level 1 FAQ

Is the CFA Level 1 worth it?

Absolutely. Earning the CFA Level 1 designation provides a strong foundational knowledge of the finance and investment world. It’s highly regarded in the finance industry and can open doors to new career opportunities. Besides, it also showcases your commitment to ethical and professional standards, which could enhance your credibility with clients and employers.

Is 6 months enough for CFA Level 1?

Six months can be sufficient to prepare for the CFA Level 1 exam, provided you dedicate consistent time to studying. The exact time required may vary based on individual learning pace and prior understanding of the subject matter. Successful candidates typically invest at least 300 hours of study. Keep in mind that there are several exam periods, so regardless of when you start you should be able to choose an exam date that gives you ample preparation time.

Which level of CFA is the hardest?

The perceived difficulty of CFA levels can vary based on individuals’ backgrounds and areas of expertise. Level II is often cited as particularly challenging due to its focus on complex financial analysis and valuation. However, Level III, with its focus on portfolio management, can be difficult too, especially if candidates are not well-versed in the practical application of concepts. See our What is a CFA article for a more general overview.

Can I get a CFA Level 1 mock exam?

Yes, you can access CFA Level 1 mock exams through the CFA Institute Learning Ecosystem and other CFA Program-approved prep providers. These mock CFA exams replicate the actual exam structure and environment, helping candidates familiarize themselves with the exam format and hone their time-management skills. Note: There is no fixed minimum passing score for CFA level 1; this is decided in each candidate cycle by assessing overall performance.

Do people fail CFA Level 1?

Yes, not everyone who attempts the CFA Level 1 exam passes on their first try. The exam is rigorous and covers a wide range of topics (e.g., capital asset pricing model, financial statement analysis, etc.), making it challenging even for those with a background in finance. However, with the right exam preparation strategies and study resources, it’s certainly possible to clear the exam successfully. For more information, have a look at our CFA Level 1 Mock exam article.

Can you pass CFA 1 by guessing?

Probably not. The CFA Level 1 exam is designed to test your understanding and knowledge across a broad range of financial topics, with each question crafted to assess specific learning outcomes. While guessing could, in theory, result in some correct answers due to the multiple-choice format, it’s improbable to achieve the passing score by guessing alone. Comprehensive and diligent preparation (e.g., making effective CFA level 1 notes, etc.) is the most reliable way to succeed in the exam.