Investing with a small amount, or investing in penny stocks, both in my opinion, are highly risky investments, as both are highly levered. Let me tell you how.
If you decide to invest 100,000 in stocks, like the friend of OP was thinking of, you can't buy even 1,000 shares of decent companies which are like trading in the range of 100-500 or even higher per share. So what you do, you lever your investment through broker, where your own money would be only a percentage of total investment, and rest will be financed by broker (and in turn, would be further financed by some bank). Say your equity is 20% and 80% is financed by the broker. A small change in this case would magnify your loss or profit by 5 times in this case, so if it's a loss, your investment could vanish just like that. Besides, you are unable to hold your position because of financing that will be incurring a high cost on daily basis.
Same goes with the penny stocks. If you buy 200,000 shares @50 paisas a share, even a change of 5 paisas would mean you gain or lose 10,000. Some would say there is more upside potential than downside, but how far down a stock can go? I would say it can go down to zero.
Investing in foreign exchange (according to my knowledge) is even riskier than investing in stock.