CFA Level 3 Study Guide: Top Tips From Candidates

I know the feeling – you’ve just beat the beast that was Level 2 – that was the hardest one, isn’t it?

Well… yes and no.

While on paper Level 2 is harder due to the sheer amount of material, Level 3 is a challenge for other reasons. CFA Level 3 tends to be underestimated and also the most misunderstood – it’s not that candidates don’t spend enough time preparing, but rather sometimes don’t spend the time to understand how Level 3 works.

That’s where these 10 golden rules of Level 3 come in in our CFA Level 3 study guide – distilled from thousands of experienced candidates and CFA charterholders – that every Level 3 candidate needs to bear in mind.

You’re nearly there!

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CFA Level 3 study guide: Our 10 golden rules, summarized

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#1 – CFA Level 3 is like Level 2, but with a twist

Level 2 is heavily quantitative and mostly calculation-based.

On the other hand, Level 3 is very qualitative and more conceptual in nature – understanding the spirit and concept behind the topics is what will get you points in the exam.

Even though Level 3 covers less material overall, the difficulty for most candidates stems from the “constructed response” format unique to Level 3, which forms 50% of the exam. Constructed response is basically “non-multiple choice”, where you have to write your answers down (see #5 for more details).

In Level 3, the range of what can be asked is extremely broad, which is worsened by conceptual readings that can feel quite vague and dry to go through at times.

On average, CFA Level 3 candidates spent 344 hours for their exam preparation.

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​#2 – Utilize the CFA curriculum more (selectively)

The CFA Institute curriculum materials are particularly useful for Level 3 candidates precisely due to the conceptual nature of the exam, as it gives you a flavor of the style of questions and how to answer them.

Whilst some candidates swear by it and use it exclusively for Level 3 preparations, other candidates may find the endless chunks of text unbearable and choose third party materials instead. I’ve seen both camps of these Level 3 candidates pass, so choose whichever works best for you. 

However, if you’re using third party materials only, it is worth considering utilizing the CFA curriculum materials selectively to complement your studies, namely:

• Do the End-of-Chapter and ‘Blue Box’ questions after completing each reading (and more). This gives you an initial gauge of your understanding so far (useful info when it comes to practicing), as well as an opportunity to get used to the style of questions. Leaving this too close to the exam may cause a panic scramble later. You can also re-do these questions after completing all your readings for another soft assessment of your overall understanding of the curriculum.

• Refer to the Curriculum materials to clarify any ambiguous areas, especially for constructed-response practice questions or areas you choose to make summary notes.

• Refer to the Curriculum for Ethics and GIPS to supplement your understanding as GIPS can be a pain. Read our top CFA Ethics tips for guidance too.

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#3 – Do not underestimate your fatigue

After 2 years (or more) of sacrifice and testing your willpower, usually this round will be the hardest in terms of the mental strength needed to see this through properly. This can lead to cutting corners in your preparation that will affect your performance.

Instead draw strength from the fact that if you do this right, this is the last time you’re going to have to do this, ever. So knock this last one right out of the park.
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​Pro tip: Don’t start studying too early, for example in August (9 months in advance). Because this is likely to lead to burn out towards the end, when you need the willpower and focus most.

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#4 – Consider using our recommended Level 3 topic study order

Since 2019, Level 3 curriculum has been going through a massive overhaul in terms of content and topic weight changes.

CFA Level 3 Topic Area	% Weighting In 2023 Exam
Economics	5-10%
Equity	10-15%
Fixed Income	15-20%
Derivatives	5-10%
Alternative Investments	5-10%
Portfolio Management	35-40%
Ethics	10-15%

We have taken into account the topic weights and difficulty of each topic and devised an optimal Level 3 topic study order to utilize your time more efficiently. 

Check out her Level 3 Best Topic Study Order article for more details.

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​#5 – Understand the constructed response format and its implications

The construction response paper’s “essay” format will be hard, but not hard in a way you will expect it to be.

In fact, ‘essay question’ is a misnomer – it’s just not multiple-choice where written answers are required.

They fall into one of two broad categories:

1. Calculation-based answers, in which case show all your workings/methods to make sure you get all the points you can;
2. Word-based answers, in which they’re looking for specific answers to the questions.

It’s the second type that most candidates have trouble getting used to. You need to make sure understand exactly HOW to answer the short answer questions in the first exam session:

• Be concise and get straight to the point: Remember, it’s not really an “essay” question. The examiner is looking for key concepts, not a Pulitzer novel. You will find that for most of these you either know the answer (in which case it takes just a few minutes to type it down in bullet-point form) or you don’t. And if you don’t, writing about all these other concepts that you know isn’t going to help.

• Type efficiently to save time, but show your workings and thought processes, if you have time: You can use simple sentences in bullet points and common notations (e.g. formulae, arrows, equal signs, etc.) but make sure to write enough on the page to get full points. Identifying the right answer is one thing, you need to show that you actually understand the concept and apply it directly to the question.
  
• Be familiar with computer-based-testing format: This is all new to us this year, hopefully typing is your strong suit!

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​#6 – Don’t forget preparations for the item set paper, though

For most Level 3 candidates (including Sophie’s past experience), constructed-response format in the first paper tends to be the tougher section.

While practicing for the essay section is important, please don’t forget the item sets because you’ll need to do well here to boost your overall score. Most of the points on your exams are secured in the item-set paper because everybody drop 20-30% on average in the first paper. 

CFA Institute recognizes this trend and has changed the format to include both a mix of item sets and essay questions in each paper since Feb 2023.

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​#7 – Mock till you drop (under time constraint)

I won’t delve into the specifics of practicing for the item set paper format (vignette-supported multiple-choice questions) given your previous Level 2 experience. You know what to do here. Having done it before doesn’t mean you pay less attention to it though, especially given its importance (see #6). 

A common challenge for Level 3 candidates is how to go about practicing the constructed response section in the first paper. Here are a few tips and advice:

• Save at least 6 weeks for practice exams and revision: from our experience, it is best to go through the readings quickly once and start trying out practice questions under timed constraints. You’ll learn the most during this period as you “plug the gap” in your knowledge.

• Do actual timed practice papers with typing for first paper: You need to practice this for computer-based exam.

• Grade your constructed response practice papers conservatively (like a robot): It is crucial to bear in mind that when you’re practicing past papers, what you’re really learning is the way to respond to the exam, not what exactly will be tested. In general, don’t mark yourself as right if you didn’t mention the concept the guideline answers is looking for by name.

• Make summary notes on areas you’ve gotten wrong after each practice paper: this is a neat way to “plug the gap” in your knowledge as you go along, and handy for last minute revisions later.

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#8 – Learn to skip questions to maximize your score

We talked about importance of time management since Level 1. In Level 3, you’ll need to hone this technique further.

For item sets, you already know how to do this as it is the same as Level 2:

• ​give yourself a set time per question to choose an answer (say 1.5 minutes since you need to allocate some time to read the vignette as well),
• choose the best answer you can when the time is up,
• circle the question (so you can come back to it later) and move on to the next.

For the constructed-response questions, the spirit of this technique is similar:

• When time is up, skip the question (or sub-question): you need to learn to recognize when you’re about to waste a bunch of time, make peace with giving up (for now) and moving on to the next question. This may sound counterintuitive to maximizing scores, but it gives you a chance to skim the WHOLE paper’s questions quickly and tackling the ones you’re confident in, leaving you time to ponder over those you skipped earlier to gain as much partial credit as you can. A good rule of thumb is to give yourself 30 seconds to scan the question and decide if you know how to tackle it. If not 100% sure, move on and come back to it later.

• You need to reach the end of the exam with reasonable time: because it is likely that each question has some easier parts to it which you can score on. The opportunity cost of missing these “sure win” answers are high, if you didn’t leave enough time to have a chance to write your answers down.

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​#9 – Level 2 commandments still apply

Half of the CFA Level 3 exam is the same format as Level 2, so you definitely need to know the 10 golden rules of Level 2, too.

​With the exception of Level 2 rule #1 (which is already covered and updated above), almost all rules from Level 2 should apply.

​Refer to the Level 2 Commandments now.

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​#10 – Expect chaos regardless: keep calm and carry on

The exam questions can literally ask about any part of the CFA Institute syllabus.

While this is fine in the multiple-choice second paper (guessing strategies anyone?), but you’ll be drawing a blank in the constructed response paper. 

The important thing is to expect this to happen on exam day and not panic. It may be hard to accept, but you won’t know everything regardless how much preparations you have put in. 

When this happens, just focus on the technique of maximizing your score (see #8 above), and try to keep calm and carry on till the end. Now is not the time to give up, it is the last exam and you may have just scored enough to pass by applying this technique alone. 

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Level 3 is tough, but the good news is it is the last one! Do you have other tips to share? Let me know via comments below!

Meanwhile, here are other useful articles that should help your Level 3 preparations:

• CFA Level 2 – Top 10 Tips and Advice From Previous Candidates (for PM paper prep)
• Free and Upgraded – 300Hours CFA Study Planner
• CFA Level 3: How to Prepare and Pass CFA in 18 Months
• CFA Level 3 Topics: What Is The Best Study Order?
• 2023 CFA Exam Curriculum and Topic Weight Changes
• Fast Track CFA Charter: How to Pass the CFA Exams in the Fastest Way Possible
• Free 300Hours Guides, including the 10 Commandments
• Free CFA Study Materials 2023