CFA Level 1 vs Level 2 vs Level 3: Difficulty, Format, and How to Prepare
The CFA Program consists of three progressively challenging exams, each testing different skills. Understanding these differences is crucial for planning your 3-5 year journey to the CFA charter.
This guide breaks down the format, difficulty, content, and strategies for each level to help you prepare effectively.
Quick Comparison
| Aspect | Level 1 | Level 2 | Level 3 |
|---|---|---|---|
| Focus | Knowledge & Comprehension | Application & Analysis | Synthesis & Judgment |
| Format | 180 MCQs | 88 Item Set MCQs | Essay + Item Sets |
| Duration | 4.5 hours (2 sessions) | 4.5 hours (2 sessions) | 4.5 hours (2 sessions) |
| Windows | Feb, May, Aug, Nov | May, Aug, Nov | Feb, Aug |
| 10-Yr Pass Rate | 41% | 45% | 52% |
| Difficulty | Broadest | Deepest | Most Complex |
| Study Hours | 300+ | 300+ | 300+ |
CFA Level 1: Building the Foundation
What Level 1 Tests
Level 1 tests knowledge and comprehension of investment tools and ethical standards. It answers: “Do you know the basic concepts?”
Think of Level 1 as learning the vocabulary and grammar of finance. You need to understand what things are before you can apply them.
Level 1 Format
- 180 multiple choice questions (standalone, not vignette-based)
- Two sessions: 90 questions each, 135 minutes per session
- Break: 30 minutes between sessions (optional)
- Total time: ~4.5 hours
Each question stands alone—you can answer them in any order, skip and return, and there’s no penalty for guessing.
Level 1 Topic Weights (2025)
| Topic | Weight | Approximate Questions |
|---|---|---|
| Ethical & Professional Standards | 15-20% | 27-36 |
| Quantitative Methods | 6-9% | 11-16 |
| Economics | 6-9% | 11-16 |
| Financial Reporting & Analysis | 11-14% | 20-25 |
| Corporate Issuers | 6-9% | 11-16 |
| Equity Investments | 11-14% | 20-25 |
| Fixed Income | 11-14% | 20-25 |
| Derivatives | 5-8% | 9-14 |
| Alternative Investments | 7-10% | 13-18 |
| Portfolio Management | 8-12% | 14-22 |
Why Level 1 Is Challenging
Despite being the “entry” level, Level 1 has the lowest pass rate (41%) because:
- Breadth: You’re learning 10 topic areas from scratch
- Underpreparation: Many candidates underestimate the commitment
- Self-selection: Unlike professional licensing exams, CFA is voluntary
- Volume: ~3,000 pages of official curriculum
Many candidates think their finance degree prepared them for Level 1. The CFA curriculum is more rigorous and specific than most undergraduate programs. Don’t underestimate it.
Level 1 Study Strategy
- Start with Ethics: It’s the highest-weighted topic and builds exam-taking discipline
- Master FRA: Financial Reporting is heavily tested and foundational
- Use the QBank extensively: 2,000+ practice questions minimum
- Take 4+ mock exams: Simulate real exam conditions
- Target 70%+ on mocks: Before sitting for the real exam
CFA Level 2: Going Deeper
What Level 2 Tests
Level 2 tests application and analysis. It answers: “Can you use these concepts to solve problems?”
You’re now applying the vocabulary learned in Level 1 to analyze real-world scenarios. The questions are longer and require judgment.
Level 2 Format
- 88 multiple choice questions in item set format
- Vignettes: Each set includes a 1-2 page case study followed by 4-6 questions
- Two sessions: 44 questions each, 132 minutes per session
- Total time: ~4.5 hours
The vignette format is a major shift. You must read carefully, extract relevant data, and apply multiple concepts within each case.
Level 2 Topic Weights (2025)
| Topic | Weight | Notes |
|---|---|---|
| Ethical & Professional Standards | 10-15% | Still critical |
| Quantitative Methods | 5-10% | More regression, time series |
| Economics | 5-10% | Exchange rates, economic growth |
| Financial Reporting & Analysis | 10-15% | Pension accounting, intercorporate investments |
| Corporate Issuers | 5-10% | M&A, corporate governance |
| Equity Investments | 10-15% | Valuation models in depth |
| Fixed Income | 10-15% | Credit analysis, structured products |
| Derivatives | 5-10% | Options strategies, swaps |
| Alternative Investments | 5-10% | Real estate, PE valuation |
| Portfolio Management | 10-15% | Factor models, economics |
Why Level 2 Is Challenging
Many charterholders consider Level 2 the hardest intellectually:
- Depth: Each topic goes much deeper than Level 1
- Vignette format: Reading comprehension under time pressure
- Interrelated concepts: Questions often combine multiple topics
- Valuation focus: Equity and fixed income valuation dominate
- FRA complexity: Pension accounting, intercorporate investments, foreign currency
Level 2 feels like an exponential increase in difficulty. Many candidates who cruised through Level 1 struggle here. Allocate extra study time—350+ hours is common.
Level 2 Study Strategy
- Master the vignette format: Practice reading cases and identifying relevant data
- Focus on valuation: DDM, FCFE, FCFF, residual income dominate equity
- Don’t neglect FRA: Pension accounting alone can have an entire vignette
- Create formula sheets: More formulas to memorize than Level 1
- Practice timing: 3 minutes per question leaves little margin
- Use item set practice: Standalone questions aren’t enough
CFA Level 3: Putting It All Together
What Level 3 Tests
Level 3 tests synthesis and judgment. It answers: “Can you make and defend investment decisions?”
This is the portfolio management level. You’re acting as a practicing investment professional making recommendations.
Level 3 Format
Level 3 is unique in combining two question types:
- Constructed Response (Essay): Written answers requiring justification
- Item Sets: Similar to Level 2 vignettes with MCQs
Starting 2024, Level 3 also includes specialty pathways:
- Portfolio Management – Private Wealth
- Portfolio Management – Institutional
- Private Markets
You choose one pathway, focusing your study on that specialty.
Level 3 Topic Areas
| Topic Area | Pathway |
|---|---|
| Ethics | All |
| Behavioral Finance | All |
| Capital Market Expectations | All |
| Asset Allocation | All |
| Equity PM | All |
| Fixed Income PM | All |
| Derivatives | All |
| Private Wealth | Private Wealth pathway |
| Institutional PM | Institutional pathway |
| Private Markets | Private Markets pathway |
Why Level 3 Is Challenging
Level 3 has the highest pass rate (52%) but is still demanding:
- Essay writing: Must articulate answers clearly and concisely
- Time management: Easy to spend too long on essay questions
- Integration: Questions require combining knowledge across topics
- Pathway depth: Your chosen specialty requires thorough mastery
- Judgment calls: Many questions have no single “right” answer
The biggest Level 3 mistake is spending too long on essays. Practice strict time limits—if a question is worth 15 minutes, move on at 15 minutes even if incomplete.
Level 3 Study Strategy
- Practice essay writing: 30-50 practice essays minimum
- Learn grading rubrics: Graders use specific point structures
- Be concise: More isn’t better—answer what’s asked
- Choose your pathway early: Focus your specialized study
- Integrate concepts: Practice questions spanning multiple topics
- Review Level 2 ethics: Standards still matter
Level-by-Level Progression
The Knowledge Pyramid
Level 3: Synthesis
"What should we do?"
△
/ \
/ \
Level 2: Application
"How does this work?"
▲
/ \
/ \
/ \
Level 1: Knowledge
"What is this?"Each level builds on the previous. Weak Level 1 foundations create Level 2 struggles. Level 2 gaps make Level 3 integration difficult.
Typical Timeline
| Path | Level 1 | Level 2 | Level 3 | Total |
|---|---|---|---|---|
| Fastest | Jun 2025 | Jun 2026 | Jun 2027 | 2 years |
| Typical | Jun 2025 | Jun 2026 | Jun 2028 | 3 years |
| With retakes | 2025-26 | 2026-27 | 2028-29 | 4-5 years |
Most candidates take 3-5 years to complete all three levels, including some retakes.
Difficulty Comparison
By Pass Rate
| Level | 10-Year Average | 2025 Range |
|---|---|---|
| Level 1 | 41% | 43-45% |
| Level 2 | 45% | 39-54% |
| Level 3 | 52% | 49-50% |
Pass rates increase because of natural selection—only those who passed earlier levels attempt later ones.
By Candidate Perception
Surveys of CFA charterholders reveal:
| “Hardest Level” | Percentage |
|---|---|
| Level 2 | 45% |
| Level 3 | 30% |
| Level 1 | 25% |
Level 2 is most commonly cited as the most difficult due to:
- Deepest technical content
- Vignette time pressure
- FRA and valuation complexity
By Study Hours (Actual)
| Level | Recommended | Average Actual |
|---|---|---|
| Level 1 | 300 | 303 |
| Level 2 | 300 | 328 |
| Level 3 | 300 | 344 |
Candidates consistently underestimate Level 2 and 3 time requirements.
Recommended Prep Approach by Level
Level 1 Priority Resources
- Comprehensive notes: Kaplan SchweserNotes or AnalystPrep
- Video lectures: Mark Meldrum for conceptual clarity
- Heavy QBank usage: 2,000-3,000 questions
- Mock exams: 4-6 full-length exams
Level 2 Priority Resources
- Deeper videos: Mark Meldrum excels at Level 2 explanations
- Item set practice: Essential for format adaptation
- Formula sheets: More formulas to memorize
- Extra study hours: Plan for 350+ hours
Level 3 Priority Resources
- Essay practice: CFA Institute past exams are invaluable
- Pathway focus: Specialize early
- Timing drills: Practice strict time limits
- Integration practice: Multi-topic questions
Best CFA Prep Courses by Level
- Kaplan Schweser - Best for Level 1 (structured approach)
- Mark Meldrum - Best for Level 2 (deep explanations)
- Salt Solutions - Best for visual learners (all levels)
Frequently Asked Questions
Which CFA level is the hardest?
By pass rate, Level 1 is hardest (41% average). By candidate perception, Level 2 is most commonly cited as hardest due to the depth of technical content and vignette format. Level 3's essays are uniquely challenging but benefit from natural selection of candidates.
How long does it take to pass all 3 CFA levels?
The minimum is about 2.5 years due to exam scheduling constraints. Most candidates take 3-5 years, with the average being about 4 years including some retakes. Only ~20% pass all three levels on the first attempt.
Can I skip CFA Level 1?
No, you cannot skip any level. CFA Institute requires you to pass Level 1 before registering for Level 2, and Level 2 before Level 3. Each level builds on the previous one, so this progression is intentional.
Is CFA Level 2 harder than Level 1?
Yes, for most candidates. Level 2 goes much deeper on each topic, introduces the challenging vignette format, and requires applying concepts rather than just knowing them. Candidates typically need more study hours (350+) for Level 2.
What are CFA Level 3 pathways?
Starting 2024, Level 3 candidates choose one of three specialty pathways: Private Wealth, Institutional Portfolio Management, or Private Markets. You study general portfolio management content plus your chosen specialty, tailoring the exam to your career focus.
Is the CFA harder than an MBA?
They're different. The CFA is a deeper specialization in investment management requiring three rigorous exams. An MBA is broader business education without a single exam. The UK NARIC benchmarks the full CFA Program as equivalent to a Master's degree in difficulty.
What happens if I fail a CFA level?
You can retake any level in the next available exam window. There's no limit on retakes, but you must pass all three levels within the time you started (no overall time limit). Many charterholders failed at least one level before eventually passing.
Should I take CFA Level 1 while still in college?
Yes, if you're within 23 months of graduation. Starting Level 1 in college can give you a head start on the charter. However, ensure you have adequate study time—don't let CFA prep harm your degree performance.