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The most important thing investors need to know about stocks right now is how exceptional returns have been since the March 2020 crash.

Folks, you may not see a rally like this again in your lifetime. The S&P 500 index is up roughly 100 per cent from the market low, and the S&P/TSX Composite Index is up about 80 per cent. Looking at these returns, a reader who is headed into retirement in the next 12 months wonders whether it’s time to sell some of his stocks.

“Our returns are substantial and we never thought we would be in this position,” he wrote. “We have been thinking of selling off most of our holdings except top holdings (Canadian and U.S. banks, insurance companies, etc.) and locking in our profits. We would keep the cash in our RRSPs until the next downturn and buy only top blue chip holdings. Any advice is greatly appreciated.”

This sounds like an exercise in market-timing, which is tricky to get right. There’s some optimism about stocks for 2022, so selling now might mean forgone profits. And then there’s the problem of timing a re-entry into the markets post-correction. This reader mentioned buying in the 2008 and 2020 crashes, so he obviously has the grit to buy low. But who knows how the next market crash will play out?

Here’s an alternative way for someone heading into retirement to look at this question of whether to sell stocks that have soared in the last while: How much risk do you need – how much money in stocks, in other words – to ensure your personal savings last the rest of your life?

Find the right portfolio mix for your needs and then tailor your current stock holdings to match. In fact, it sounds like the success of this investor in the stock market could mean a higher than necessary weighting in stocks. Taking some profits to get back to a more balanced portfolio makes sense. Bonds or guaranteed investment certificates are still a valid way to diversify a portfolio, even with interest rates expected to climb this year. Remember, higher rates mean rising yields on bonds and GICs.

Focusing on blue-chip stocks paying dividends also makes sense for an investor seeking to fine-tune a portfolio after a big runup. In a less dynamic stock market, total returns built on dividends plus changes in share price will become important.

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