I think there are three main ways of making money --realistically, aside from your day job.
First, real estate.
Second, stocks.
Third, a business idea.
I wouldn't recommend starting your own business unless you have some experience or talent in that area. Most business ventures are a long-shot for the uninitiated amateur. And if you have a full-time job, it may be hard to find the time and energy to start up a business on the side.
Buying real estate in the right location is generally a good idea, but transaction costs are high and appreciation is sometimes slow, so it is typically a long-term investment. You have to make sure you buy from a reputable builder to avoid construction problems and defects. You need to be sure you have a steady job which will enable you to pay the mortgage. And hopefully you will be staying put long enough to profit from the investment. You also need to scout out a good location where the home or condo will hopefully increase in value.
Even Peter Lynch seems to recommend that most people consider buying real estate before buying stocks.
See Learn to Earn at p. 102, 109 "Stocks are likely to be the best investment you'll ever make outside of a house."
Though real estate does offer the tremendous advantage of leverage. Put down $20,000 and buy a $200,000 home with a loan at 6% interest for 180,000, practically free money after you consider inflation and tax deductions.
You are probably less likely to lose a ton of money overnight buying real estate, though it can certainly happen. So it's probably a more secure investment. And your investment grows tax free. And if you live the home two years out of the past 5, you can actually sell it tax free.
Still, I would recommend starting with stocks for several reasons. Then you can shift to real estate once you have saved up anough for the down payment and have a job you like in a city you like. Most young people will be moving around a lot until they find a job they like and owning a home may tie them down unnecessarily. Stock investing you can do from any city as long as you have internet access or a phone.
Done correctly, you can do quite well in stocks, despite the taxes. To avoid (reduce or defer) taxes you should try contributing as much as possible to an IRA or 401k so that you can trade tax deferred or tax free and let your profits compound.
I like the Warren Buffet Way and Warren Buffet Portfolio by Hagstrom as a conservative starting point. This is only a very basic intro, but not a bad way to start.
Lynch is good to read too. One Up on Wall Street and Beating the Street. Though I don't agree that his approach is all that easy for the average investor to duplicate. I think the Fischer/Graham/Buffett approach is a bit easier for the average investor to follow. (Though there is some overlap. Some of Lynch's plays are similar or identical to a Buffet type play.
There are many other excellent books out there, with more math and more advanced info, but just start with an overview first.
And of course visit as many websites and read as many magazines as you can related to finance and investing. Also watch CNBC to learn about what's going on in various sectors and in the market.
www.fool.com www.money.com www.morningstar.com
Wall St. Journal, Investor's Business Daily, Business Week, Fortune, Forbes.
If you haven't taken a basic economics class in college you should consider auditing an adult ed class or undergrad class if you have time. Otherwise buy or borrow a basic college or high school econ text and review it on your own.
Other helpful books are
Dorsey The Rive Rules for Successful Stock Investing
Graham The Intelligent Investor
Fischer Common Stocks Uncommon Profits
Bogle Common Sense on Mutual Funds
Unofficial Guide to Stock Picking
Vick How to Pick Stocks like Warren Buffett
Winning with the Dow's Losers
Stocks for the Long Run
John Neff on Investing
Irrational Exuberance
Dreman, Contrarian Investment Strategies
Superstock Investor
The Millionaire Next Door
Investing in Real Estate McLean and Eldred
I started investing after getting out of law school. Initially I only contributed the max to my 401k and put the money into S&P500 Index funds. Then when I moved to a new employer would roll over the money into a Vanguard IRA and put it in the healthcare fund and the S&P 500 fund and for a time into the energy fund.
I am about 40 now and have two homes. One in Dallas that I rent out and one in Fresno.
I paid about 183K for the Dallas home in 1993 and it may be worth 230K to 260K now give or take. I only put down about 18K or 10%. I only owe about 140K or so on the mortgage. And basically the renter pays the mortgage and taxes for me, so it's kind of like a tiny business. The home was bringing in about 1700 to 2000 a month in rent, depending on the economy, which covered my expenses.
The Fresno home I bought in 2002 for 199K. It may be worth about 250K to 280 K now, since Fresno has been a super hot market for the past 3-5 years. But I don't expect that to continue forever.
I have about 237K in my retirement accounts which I use to trade stocks. And trading is risky. Sometimes I make a lot sometimes I lose a lot. But so far, the gains seem to have outweighed the losses.
My dream is to retire at age 50. But more likely I will have to wait till 55 or 60.
Work sucks. It's boring and I think I should have gone into some type of Wall St. job instead. But there is no guarantee that I would have enjoyed any more success.
The big problem with investing seems to be that it's get rich slow. Since I don't care for my job I want to get rich fast. But that can be bad, if it forces you to take unnecessary or foolhardy risks.
My dream is to double up a couple times so that I have about $1 million cash. But that's not easy.
I can find good stocks, but need the leverage of options (calls -- 1 or 2 year leaps) to make a huge return.
But since most of my money is in my retirement account(except for about 60K in my cash account), I cannot use options (except selling covered calls).
For example, I recently bet the farm on NOK. I started buying at 17 and it kept dropping to 11 and I kept buying. I ended up getting about 12,500 shares at avg. price of 13.34. It went to 17 and has now dropped back to 15.80 or so.
My friend at the same time bought about $40,000 worth of Jan. 2006 calls at strike 10 and 15. So his return was much higher than mine. Something like 50% or so. Whereas my return was about 15 to 20% or so. I was fully invested and he still had about 310,000 in cash left over, only risking a smaller portion of his portfolio.
But don't try options until you have read and studied and traded stocks for 3-5 years. Seriously. It's very dangerous.