Final answer:
An investor nearing retirement should transition out of high risk growth stocks into more stable income stocks, preferred stocks, and bonds to prioritize reduced risk and a reliable income stream.
Step-by-step explanation:
As an investor nears retirement, they should begin rotating out of high risk growth stocks and rotating into income stocks, preferred stocks, and bonds. This strategy is recommended because it allows an investor to reduce the risk associated with market volatility and to secure a more stable and predictable income stream as they approach retirement. While high risk growth stocks can offer higher returns over long periods, they're not ideal for those who need stability and easy access to their funds soon. In contrast, income stocks provide regular dividend payments, preferred stocks offer a higher claim on assets and earnings than common stocks, and bonds tend to offer fixed interest payments and principal repayment at maturity, which can be more suitable for retirement planning.