When you join my Inner Circle service, you get to ask me your own personal investment questions, plus you get to see what other Inner Circle members have asked, along with our answers. So you can see how the service works, and get a sense of how it might help your portfolio, I’d like to share a member question about investment timing and stock market trends. I hope you enjoy and profit from it.

Q: Dear Pat, I just received $300,000 that I have to invest carefully. I have been investing in stocks and mutual funds for more than 10 years, but this new amount is very important for my retirement in about 10 years. The market has risen lately, and I’m concerned that there may soon be a correction. I would like to know if I should invest in one shot or spread the investment over a certain period of time. Please suggest a type of time frame, considering I am a “moderate” investor. My current portfolio is about 70% stocks, with 60% in Canada. Thank you for your help.

A: Buying gradually may make you more comfortable than plunging right in. However, because of the way stock market trends typically unfold, it’s likely to cost you money in the long run. If you can afford to keep your money in the market for, say, five years, then the sooner you buy the better.

Long-term studies of stock market trends show that the market as a whole generally produces total pre-tax annual returns of 10% to 11%, or around 7.5% after inflation. Over periods of a few years or less, the return is far more variable and always uncertain. The surest way around this is to start investing when you’re young, and invest regularly over the course of your working years. Then you can sell gradually in retirement.

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In fact, if you invest a fixed sum at regular intervals throughout your working years, perhaps increasing that sum from time to time as your income rises, you can largely forget about stock market trends. That’s because you’ll automatically buy more shares when prices are low, and fewer when they’re high. And you’ll benefit from the long-term rising trend in the market.

This investing technique is called dollar-cost averaging. It’s a little like systematic saving, except that you put your money into stocks (or mutual funds) instead of a bank account. However, some investors try to apply the dollar cost averaging principle to the investment of lump sums, by spreading their buying out over a period of time. That’s different. This gradual buying is sometimes referred to as “averaging in.”

For instance, suppose you plan to invest $50,000 in stocks, but you feel uncomfortable doing so all at once. You might resolve to average in by investing $12,500 every six months over two years.

Averaging in can be psychologically comforting. However, it will only improve your long-term results if you happen to begin when the market is headed down. But since the market goes up around two thirds of the time, on average, gradual buying is likely to cost you money. But it may still be worthwhile if it lets you sleep easy. In any event, my view is that if you expect to be able to hold on to your stocks for, say, five years, then the sooner you buy, the better.

One final point: you plan to retire in about 10 years, but that’s when you begin dipping into your retirement savings. When you invest a lump sum gradually, you lower the risk of buying just prior to a market slump. However, holding off on going into the market means you generally invest in lower-yielding fixed-return investments for a longer period. This raises your risk of running out of money during retirement.

If you have investment-related questions like these, or if you’d like to ask me about stocks you’re considering buying (or selling), you should join my Inner Circle service. Click here to learn more.