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Cocktail parties always sound so sophisticated. You imagine suited men and women in short dresses and dramatic jewelry drinking out of impossible glasses. But classy does not have to mean stuffy, or even expensive.
Cocktail parties can actually be very cost effective since you are not expected to serve people dinner. A traditional cocktail party would take place from 5-7, with the idea that people would leave your house and go to dinner around 8. Given that many people today eat dinner around 6 or 7, you need to leave very clear hints on your invitation that dinner will not be served. Simply calling the party a "cocktail party" and giving it a start and end time will help.
If you don't want to have the expense of stocking a bar, you could alternatively have a "wine and cheese" or a "beer and cheese" party instead. These parties take place at the same time, but feature a variety of wines and beers instead of Martinis and other mixed drinks. (Of course, hiring a bartender will help to take most of the work off of your hands, leaving plenty of time to enjoy the cocktails!)
Although you are not serving dinner, you will need to serve food. Cocktail party food should be one bite and eaten with fingers whenever possible. A general rule of thumb is 10-12 "bites" per person. Savory and sweet can both be served, but should not be presented as "courses." Food can be passed or laid out as a buffet.
Most people will stand at a cocktail party, but having some seating and some "tall round" tables for people to lean on and place plates on is helpful. If your party is in honor of someone (say an engaged couple) or a fundraiser, make any presentations in the middle of the announced start and end times. Don't expect the party to end right at the announced end time.
The main point of a cocktail party is conversation, so entertainment should be either strolling (such as a magician) or low key, such as a small trio or quartet.