What do the stock market and the game of musical chairs have in common? Will you be sitting comfortably when the music inevitably stops?

With global stock markets rallying today, it's easy to forget the risk involved when investing in stock or bond markets. 

On December 5, 1996, then Federal Reserve Chair Alan Greenspan declared markets were experiencing, "irrational exuberance". Four years later came the tech bubble stock market crash of 2000, when the Nasdaq ended the year down 35%.

It's always tempting to increase your risk tolerance when markets seem to have one good year after another, but then FOMO, the fear of missing out, takes hold. And now your allocation to stocks that started at 50 or 60% of your total portfolio when you retired a few years ago has, after the past few years of stock market gains, reached 75% of your portfolio. So do you re-balance your portfolio back to your target of 50 or 60% stock exposure, or do you let it ride and hope the music keeps on playing? 

Finally, keep in mind, we might have another couple/few years of growth in the stock market, but we are no doubt in the irrational exuberance phase. How long this will last before the music stops is any ones guess. 

When the markets do inevitably turn south and the correction/crash begins, trying to make decisions about what to do with your portfolio at that stressful time is risky business. If you are currently retired or soon to be retired, do yourself a favor and go back to your target allocation of stocks and be grateful for the past few good years in the market. You'll sleep like a baby at night knowing you took care of your future financial security.