hello! i've really enjoyed reading these forums. i want to learn a lot from you folks, and just in case i find i know something, i'll be sure to share it.
i plan to start reading up on investing as much as i can, but i had a "dumb" question to start out with. i'm not trying to beat the market, or get rich quick (i love the name of this website!), or use any "schemes" or anything like that, but i was was wondering if there is any good information about how to invest smallish amounts (to start with), and not have any gains eaten up with fees? (i guess this is general investing advice?)
also, i am trying to go to school starting in spring 2013 (when i qualify for in-state), and i am trying to decide the best place to put my money over the next year. i am pretty confident i can sock away $800-$1000 a month to put towards school, and i want to get the best use out of that money.
please feel free to link me to threads i may have missed, or direct me to webpages/literature with this info. i don't mind digging myself, just trying to get a direction. thank you so much for any help you can give!

Hi there, and welcome.

In general, proper investment strategies begin with retirement accounts. This means an employer 401k/403b plan (if applicable), or a Roth/Traditional IRA account. You want to ensure you're saving properly for retirement before you do more targeted, higher risk investments.

A safe rule of thumb is to create your financial plan in this order of priority. Don't do a lower item on the list until you complete the items above it.

1) Emergency Fund. Eliminating all debt, saving for retirement, investing, etc. means nothing if you're one paycheck away from obtaining more debt or going under completely. Start with at least 1k of an EF, but try to get to at least 3 months of living expenses (you'll want to increase to 6+ later on). This money is only to cover a job loss and/or a medical emergency. This isn't to buy new toys with.

2) Get out of debt. Make sure all credit card, student loans, auto loans, etc. are eliminated. For you, it sounds like this may need to be tweaked to limit the amount of student loans you obtain as much as possible.

3) If your employer has a 401k match, contribute enough to that plan to get your match. So if your employer will match 4% at 100% if you contribute 4%, then contribute 4% to your 401k.

4) Next, open a Roth IRA account and try to hit your yearly cap of 5k (this will decrease and eventually go to $0 as your income grows, so take advantage of it while you're young).

5) If you can still save more, then go back to your 401k (assuming the fees are reasonable) until you hit your yearly max of $16,500.00

6) Now you can start focusing on riskier investments. This may be in direct stock purchases, real-estate, business ventures, etc.

Essentially, you want to be very careful about jumping to #6 without having 1-5 in place first. It's good to have risk in your portfolio, but you want to ensure you're focusing on the basics first. If you don't, you could find yourself without retirement funds in a few decades.

Hope this helps!

@Capo - That doesn't seem to answer the OP's question.

OP - over a 2 year time frame, you have to stick with risk-free investments. That means
Savings account
money market account
treasury bills. (It's far enough away that you could potentially use i-bonds)

Capo, your list also has nothing to do with risk. #6 could be put in FDIC-insured CDs while someone could (stupidly) keep their emergency fund in options and futures.

In general the level of risk should be determined by the time horizon for needing the money rather than the type of account (taxable, tax deferred, 401k, etc.)

The list also has some other "flaws" with it. Generally I agree that it is the normal advice for normal people planning a normal retirement with normal exposure to normal risks. But without a lot of specifics the list may not make sense. It's about as valuable as knowing the average human is a 16 year old Chinese girl named Mohammed.

For example, a couple with two secure government jobs, high tax brackets, and a desire to retire early probably does not need the emergency fund as you described it (though they do need a plan), would not be eligible for a Roth, and better concentrate on #6 rather than constrained tax-privileged accounts if they are going to fund their early-retirement.

In the specific situation presented here the OP wants to save money for school. That pretty much eliminates every option you mentioned except #6 and raises several other possibilities you did not mention (529 plans for example).

To the OP:

Since you are only looking out 1 year and will be making monthly deposits I would put the money in a money market account. I would not worry about an emergency fund unless you have dependents. Your college savings is essentially your emergency fund. Hopefully at your age your parents are also still a backup plan but even if they are not I think I'd commingle the emergency fund and college fund.

Vanguard is a good place to open the money market account.

You will not be making enough interest to be concerned about taxes.

If you're looking to accept a little more risk, a tax-managed balanced fund might be a good option. Half stocks, half bonds, low taxes. Should be ok over a short timeframe, but requires an initial investment (for example, Vanguard has a fund that needs an initial investment of $10k).

How much do you have saved already?

Yeah, sorry about that OP, I didn't exactly read your question clearly. That's what happens when I post while on a conference call.

I think HW's quick and easy suggestion makes sense. When you're ready to focus on longer term goals, then maybe reread what I said.

thanks for the replies! in light of what you guys said, i think i'll just try to find the highest interest savings account or money market i can find, and go with that for the. i'll probably try to put any additional that i can save into an index fund and forget about it.
if i were to "contribute" to a fund regularly once month, after i get my pay, is there a way to do that without having a chunk taken out as a transaction fees each time i deposit?

i will. thanks for taking the time to post.

In short, you have to take proper investment strategies as well as proper handling of money.

Absolutely. That was great advice for long term savings.