Brian was recently interviewed by a reporter from a large national publication about the extraordinarily long bull market run we’ve seen — and whether investors should be bracing for a drop. Part of their exchange is below:

REPORTER: Are your clients worried?

BRIAN: No, they know that our stock market takes two steps forward and one step back and then repeats. We plan accordingly.

REPORTER: What are you advising your clients to do?

BRIAN: There’s no doubt that this bull market is getting long in the tooth. I’m currently advising clients to dial back the risk a little bit. For example, if a new client walks in the door tomorrow and their risk tolerance points to a 60% stock allocation, I’m probably going to recommend a 50-55% allocation to stocks instead.

REPORTER: It seems the folks most at risk are those who might need the money soon — for retirement, to pay for college, etc. What sort of advice can you provide to folks who may be tempted to make changes?

BRIAN: This is true. One disciplined way to de-risk is to decrease the stock exposure in your portfolio by X% for each Y% the stock market increases. If investors don’t want to go that route but feel the need to do something, they can help ensure that their risk exposure doesn’t increase by doing things like not reinvesting the dividends that their stock holdings generate.

REPORTER: Who should make changes — and how can you gauge whether you should make any changes?

BRIAN: The closer you are to needing the invested funds, the more seriously you should look at taking steps to cap and/or reduce your risk levels. In other words, your time horizon should play a critical role in this type of decision-making. 

REPORTER: Are there any questions investors should ask themselves?

BRIAN: How close am I to needing the money I have invested in the stock market? What’s my Plan B if the market takes a dive? Can I really live with Plan B?

REPORTER: How can retirees or pre-retirees protect themselves?

BRIAN: Speak with your financial advisor about doing a risk review. If you don’t have a financial advisor, get one. This is more important than ever since such a small percentage of employees are covered by defined benefit retirement plans these days.