My 19 year old son wants to start investing. He has saved about $1,000.
What should he invest in?

Louise

Any new investor must learn the basics & learn to identify good & bad opportunities. Must learn to build a portfolio to minimize risk.

I will suggest to start a free account in forex will be a good. Foreign exchange may be more risky, but it is good to learn the investment concepts.

What is his idea for the money, long term investment, will he need it in a few years. Is it a school fund, or looking at longer term retirement investment ?

But the idea to do a portfolio, to invest in fund accounts that spread out various risks, Some funds have possible higher yeilds but more risk, the safer investments have lower payouts.

I spread my investments in about 5 funds ( that I change from time to time, reviewed each month) last year my best did a little over 16 percent, my worst at least did not lose any money ( around 3 percent interst but with inflation, really no profit at all)

Have him check out ShareBuilder.com. They offer cheap trades ($4) and a wide range of ETFs. These act a lot like mutual funds, but generally don't require large initial investments (many mutual funds require 2,500 to start!). He can invest in index funds which In my opinion are a great way to start investing. An index tries to mimic a particular segment of the market or the entire market at once (like the Dow Jones or S&P 500). Although it's always wise to buy into multiple areas to diversify your portfolio. Aside from a US Stock Market index he could look at a real estate index, a foreign index (he could choose a specific region or simply "foreign"), a bond index and a materials index.

The great thing about ShareBuilder is that the $4 investments happen once a week (Tuesdays) which you setup via an "automatic investing plan" which is completely under your control. This keeps you investing a small amount each month instead of a large lump sum every once in a while. This is called "dollar cost averaging" which you'll hear a lot of. Basically you spread out your investments and invest the same dollar amount each time (however often you choose). By doing this you decrease the likelihood of investing and having the stock market falling apart the next day. Likewise you buy more stock when the price is "cheap" and less when it's more expensive because the current cost determines how many shares your investment dollars will purchase.

As Fr. Chuck said, it is important to determine the goal of the investment before investing. If he'll need the money in less then 5 years he should probably stick to CDs or high quality bonds.

I'm 24 and finished college about two years ago. I found two books very useful and recommend them for your son.
Personal Finance for Dummies (found it on Amazon.com)
Mutual Funds for Dummies (found it on Amazon.com)

When I got these books they had a special for both for $26 (I think) and since it was more then $25 I got free shipping.

Final Note: Congratulations on helping your kids learn about money. A lot of parents don't do this and many people have problems with money as a result.