You crawl before you walk. You walk before you run. You run before you drive a car. Investing should be approached in the same manner. You begin slowly with small amounts of money and very low risk. With time, both the size of your investments and the risks can increase.
Crawling: Savings
Some people don't think of savings as an investment. Anything that brings you a return on your money is an investment. In fact you could lose money and it would still be called an investment.
You can open a savings account at a local bank or credit union. There may be a very low minimum deposit. For higher rates, you can search for online banks such as Ing Direct. If you have a job, you can have your paycheck automatically deposited to your checking account and direct part of that check to your savings account.
The next level up is a Money Market account. The interest on these accounts is usually higher than savings. You can make deposits and withdrawals as easily as with a traditional savings account.
Certificates of Deposit (CDs) are another savings vehicle. These accounts are different from the preceding types because access to your money is limited. You invest a certain amount of money in a CD for a certain time. Another difference in CDs is that there may be a minimum deposit. Essentially, the more money you invest and the longer the timeframe (from three months to five years or more), the higher the interest. With CDs, there is a steep penalty for early withdrawal.
What all of these savings modalities have in common is zero risk.
Walking: U.S. Treasury Bills, Notes & Bonds
These vehicles are essentially a more sophisticated form of saving. Like a saving account, interest is paid on all of these investments. They are as safe as savings accounts, money market funds, or CDs. They are also risk-free. Some of these savings vehicles are not as attractive as they once were, nor are they as risk-free. Even the forms of savings mentioned at the beginning are not that attractive today. With interest rates as low as they are, you will actually lose money in most of these vehicles because inflation is so much higher than your return.
In brief, savings bonds and notes have a fixed interest return paid every six months until they mature. Notes mature in two to 10 years and bills in a year or less. For these, there are minimum investments, $1,000 for a bill or note and $25 for a bond.
Like a CD, these instruments lock your money in for a specified time.
Running: Mutual Funds, Exchange Traded Funds, & Stocks
At this point, the risk element goes up and there is no government protection for any of these investment instruments. You can still make rather minimal investments in exchange traded funds (ETFs) and stocks. But most mutual funds have minimum starting investments.
Mutual funds are a collection of stocks. Many are a basket of stocks that follow certain indexes such as the S&P 500 or NASDAQ. Some follow certain industries such as agriculture, pharmaceuticals, or energy. These mutual funds have a fund manager who buys and sells the stocks in the fund. Some of the index funds are more passively managed. A managed fund will have more fees than an un-managed fund.
The advantage of mutual funds is that the risk is spread around among a number of stocks so your gains are not dependent on any one company's performance. When researching mutual funds it is usually possible to see their returns as far back as 10 years but this is no guarantee of future earnings.
ETFs are similar to mutual funds in their makeup. They follow indexes or industries. But ETFs can also follow a more narrow market, such as gold or silver. The biggest difference between ETFs and mutual funds is that ETFs can be bought and sold just like a stock. The only cost for an ETF is your broker's commission.
Individual stocks represent the highest risk and highest potential returns. "Playing" the stock market is not a game for the faint of heart. "Experts" in the stock market bite the dust all of the time. Personally, I would seek out a trustworthy group of prognosticators and follow their advice on paper to see how they do.
Any kind of stock market investing in these volatile times should be done with great care. Beware of the TV pundits who keep telling us the bottom is in. Look at their track record before you start taking their advice. But you can open a stock account online with a minimum investment. Watch out for those that charge inaction fees or annual fees. Look for low commissions.
If you do your homework, you can find many stocks for under $1/share that could take off. Invest a small amount and only what you are willing to lose. As you get a little more experience, you can increase your risk but keep all of your more conservative investments going at the same time.
Driving: Futures, Options, Warrants, etc.
When you're ready to drive, there are many more exotic and high-risk investments you can play with. Each of these requires a lot of study and a cool head. It is mostly professional investors/speculators who play with these kinds of instruments and the money involved in them. Still, you might look into the various options and see if something appeals to you. Study it and stick your toe in the water if you feel like it. But don't risk more than you can afford to lose.
At the bottom of every investment option is money saved. Before you can invest, you must get in the habit of saving. Sometimes that means putting off certain things or not buying whatever you want on a whim. Even if you're young, I guarantee that you will be very happy if you start a saving and investing discipline as soon as possible.