CFA Guessing Strategy: 10 Top Tips To Guess Intelligently

It is CFA exam questions practice season now.

Besides being the most effective way to prepare for the CFA exams, it’s also always a good idea to really get to know the exam format well – hence our recommendation on completing 4-6 practice exams!

Regardless the preparation level, there will be times during the exam where you simply haven’t got a clue to what the right answer is.

In this CFA guessing strategy guide, here are top 10 tips to help you guess better during the CFA exams, and more importantly, what you should avoid doing to improve your chances of getting the correct answers.

Let’s take a look!

Before we begin, an important disclaimer: these are tips that should never trump your knowledge of the CFA curriculum.

​These set of tips are meant to be a last resort – when you just don’t know what else to try. 

None of these tips consistently work all the time, so use them only if you have to.

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1. Eliminate answers that don’t really answer the question.​

In non-numerical CFA exam questions, sometimes you can have answers that may be factually correct, but if you read the question carefully you’ll realize that this answer doesn’t actually apply to the question.

​Congratulations! You’ve just eliminated one answer possibility, ​thus increasing your likelihood of being right to 50% instead of 33%.

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2. If two alternatives say the same thing, both are probably wrong.​

Examples for this one include questions where you have to figure out long/short positions, in-the-money/out-of-money configurations, or FX questions.

​Very occasionally, in the CFA exams you may manage to find out that e.g. two answers, although different combinations of financial instruments will result in the same investor position relative to market movement.

​Since they can’t both be the answer, they are probably both wrong.

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3. If two alternatives are mutually exclusive, eliminate the third choice.

For multiple-choice questions, I frequently glance at the answers first before reading questions to have an idea what the question is about.

Why?

It’s extremely useful to scan to see if there are any obvious mutually exclusive answers (meaning both answers can’t be true at the same time) before reading the question.

These questions with mutually exclusive answers are awesome as it improves your chances to getting it right straight away, because you can just ignore the third choice. They do pop up from time to time, so look out for them.

Not just in the format of words, you can easily eliminate answers with “+” or “-” sign right away if you know which ‘direction’ the answer should be. Ignoring this and rushing through the questions may lead to missed opportunities.

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4. The answer to one question is sometimes implied in another question. (L2 and L3 only)

This applies in the vignette format in Levels 2 and 3, where questions are about the same passage. If you get stuck on one question, reading through the other questions may shed a bit of light on what the answer might be.

CFA exam questions for Level 1 are independent of each other, so this does not apply to Level 1.

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5. Pay attention to ‘absolutes’.

This is an 80/20 rule: whenever I see answers with absolutes, alarm bells start ringing in my head to pay more attention whether such answer could be eliminated given the strong statement.

Examples of absolutes including (but not limited to) usage of these words:

• never
• always
• all
• only
• just
• none
• not
• must
• every
• no

However, I’m not saying that all answers with absolutes are incorrect. They are more likely to give you a clue to the answer.

All I’m saying that when there’s a sentence with absolutes, pay attention to it and determine whether it’s wrong (then eliminate it) or correct (your job’s done, move to the next question).

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​6. Don’t apply definitions from outside the CFA curriculum.

​Answer the questions based on information from the readings, not based on educational knowledge that you have. A good example is the FX notations, which seems to be the other way round in CFA curriculum, which can be confusing for candidates who work with foreign exchange in their daily jobs.

​This may sound like it’s against the spirit of education, but in the end if there is a question that is based on outdated information (for example), answer it according to the CFA curriculum. 

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7. Be aware of the ‘do-the-right-thing’ Ethics mistake.

Commonly found in Ethics questions, I frequently found myself choosing an answer that sounds like the “right thing” to do, or “oh, that’s ethical and good”. 

Ethics is important and increases in difficulty across 3 levels, you need to nail it to pass:

• There’s a marked difference between what the Code of Ethics says and what you may ordinarily think is “right thing” to do.
• Apply the principles you’ve learned in the CFA curriculum into your thought process when choosing your answers.
• Remember that the question often asks whether the subject is performing what is right for their clients and their duty as a professional investor. Other aspects of their behaviour, especially if they’re nothing to do with investing, may be irrelevant.

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8. Never argue with CFA exam questions.

Sometimes you come across a sloppy question and think, “This is a terrible question – it’s not even worded properly!”.

Try not to get angry. Read it twice to make sure you’ve really understood the question, and answer it the best you can.

Don’t waste time having a mental debate with no one during the exam. Don’t worry – if it does turn out that the CFA Institute made a mistake or worded a question ambiguously, they would award points in favor of the candidate.

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9. Don’t be afraid to change your initial answer.

The theory that you should always trust your initial instinct with multiple choice questions, is mostly rubbish.

Studies show that although candidates often believe that changing answers is bad, it generally results in a higher test score. 

Changing from “right to wrong” may be more painful and memorable (Von Restorff effect), but it is probably a good idea to change an answer after additional reflection indicates that a better choice could be made.

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10. When all else fails: choose the alternative that makes the best sentence, when added to the open-ended question.

​Sometimes you have a ‘complete the sentence’ question to which you have no clue what the answer is.

Try reading the entire completed sentence in your head and choose the answer that sounds best to you. Not at all a bulletproof solution, but what else can you do?

IMPORTANT: 

​None of these tips consistently work all the time, so use them only if you have to.

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What NOT to do for the CFA exams

DON’T follow these tips below – they probably won’t work. It’s not a good idea to try them.

If you’ve done reasonably well in high school and university, chances are there are many other tricks you’ve relied on through multiple choice questions. Not all of them will work in the CFA exams.

Here are some that I know have little chance of working in the CFA exams:

1. Sticking to your first answer, even if you feel like changing it. If you feel like your initial answer is not right, don’t be reluctant to change it. Studies have shown that although candidates often believe that changing answers is bad, it generally results in a higher test score. In these studies, the percentage of “right to wrong” changes is 20%, whereas the percentage of “wrong to right” changes is 58%, nearly triple – there are benefits of changing initial answers once in multiple choice questions when in reasonable doubt.
2. When 2 answer options deal in different ways with one concept, one of them is usually right. This doesn’t work. The odd one out could be a double-bluff.
3. If two answers contain a similar sounding word, either could be the answer. Yeah, that doesn’t work either. Not a valid indicator at all.
4. If two answers are almost identical except for a few words, either could be the answer. Again, don’t trust that – it could be a trap!
5. When in doubt, choose B (or A, or C). Some people believe that there is a human bias towards setting answers in the ‘centre’ of the selection, hence B is a good bet if you have no idea. This will not work in the CFA exam – randomness is practically guaranteed.

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Hope this helps towards your upcoming CFA exam. If you have any other tips that have worked for you in the past, share them with us in the comments below!

Want more help practicing for the CFA exam? These guides will help:

• The Ultimate Guide to CFA Practice Questions
• Free CFA Mock Exams: Level 1 ∙ Level 2 ∙ Level 3
• How to Improve Your CFA Mock Exam Scores
• What Is A Safe CFA Mock Exam Target Score?