Timing the market is the most difficult thing to do as no one can really say when the market is bottoming out or hitting the top. Thus the best way to put your money into mutual funds would be in a staggered manner through systematic investment plan (SIP) or through systematic transfer plan (STP) after putting the money into a liquid plan. The best way to redeem your wealth created is through systematic withdrawal plan (SWP).
How SIP works: SIPs work like a bank recurring deposit. You have to pre-fix an amount which you want to invest every month or quarter in a particular fund. On the given date the amount is deducted from your bank account & invested in the fund. SIPs help investors even out the market highs & lows and over the long run the price is averaged out. At market lows he gets more units and at market highs he gets fewer units.
How STP works: When you get a big bonus or there is a large inflow of cash you should not invest all the money at one go. First invest the money in a liquid fund which will give steady but low returns but can be exited anytime. Then set up a STP from the liquid fund to another fund (Debt, MIP, Balanced or Equity) depending upon your investment horizon & risk appetite. Over the next six months to a year a fixed amount will be transferred to the selected fund while the balance amount will remain in the liquid fund and continue to give you 6-7% returns.
How SWP works: After you have created your wealth over a period of time & want to withdraw your money (say after retirement) in a planned manner. A SWP helps you to withdraw a fixed amount from your mutual fund corpus on a fixed date every month or quarter. This comes in really handy as a tool after you retire to withdraw a fixed amount periodically (say totaling about 7-8% of your fund annually) for you daily needs while your corpus grows. Thus through SWP you enjoy the wealth you have created while the remaining corpus keeps growing.