Summary of Methods for Investing in Mutual Funds

Decision Time

While market-timing is out of the question for many investors (but some still try), whether you invest all at once or a little at a time depends on how much time you have to invest and whether your primary goal is maximizing return or minimizing risk.

The shorter your time horizon, the greater chance you take of losing money with a lump-sum investment. However, if you had $20,000 to invest, it probably wouldn't make much sense to invest $1,000 per year for the next 20 years. Over long time frames, funds go up more often than they go down, and when they go down, they eventually bounce back. It is almost certain that the net asset value you would pay 10 years from now would be higher than the NAV you would pay today.

Some investors would combine the two strategies: invest as much as you can today and vow to invest a little more each month or quarter. That'll keep you disciplined and have you investing right away.