Some professors of finance will tell you that you need 14 to 16 stocks spread across six to eight industries to be adequately diversified in domestic large-cap stocks, but that opinion is a bit outdated. Others say 25, and there's some pretty good evidence that 40 different stocks spread across the industries and industry sectors will provide full diversification across the domestic large-cap universe. But leaves out about 75% of the worldwide stock market, and then there are bonds, commodities and real estate, which provide additional diversification.

Mutual funds, especially index funds, provide good diversification with a relatively small initial investment.

Asset allocation should be a dollar amount based on a predetermined percent of the total portfolio, where the percent is the desired allocation to a specific asset class or industry. As stocks are purchased in round lots of 100 shares, it can be difficult to get the desired weightings in small portfolios. Mutual funds overcome this obstacle, as they are purchased in dollar amounts rather than number of shares. The only constraint is the minimum initial and subsequent purchase amounts set by the fund managers. Initial purchase amounts vary from a few hundred dollars to thousands of dollars. Subsequent minimums are usually significantly less.
References :

My IRA is professionally managed, but my DRIP Plan I choose the stocks. And my DRIP Plan has been outperforming my IRA.

I have 3 companies in my DRIP Plan that I purchase once a month, usually $150 per month for each company.

I have been buying US Bancorp , Walmart and Johnsosn and Johnson since I started my DRIP.

I have been very pleased with the results.

My suggestion is to keep the number of companies you invest in down to 3 or 4.

But it is your money.

Good Luck
References :
http://www.low-cost-stock-recommendations

.com

DRIP Section

#2;
Always do "like" dollar amounts vs. an equal amount of shares. Then your exposure will be roughly the same.

#3;
Another way of doing it is "Position Sizing". This way you can first determine your maximine loss per each stock. You then find the best place for a "stop" order. Then adjust your share size based on those numbers. This would be a more
proffessional way managing your risk.
References :

I suggest you save some money and learn to trade in the mean time. Here is a good site that can teach you a lot about trading.
References :
http://www.stocks-simplified.com

Since I am licensed, I can tell you I wouldn't recommend investing in individual companies. You want to be as diversified as possible to avoid putting your eggs in too few baskets (think about Enron).

Going into a Roth is an excellent move.
References :

Sources:
http://www.vanguard.com/VGApp/hnw/planningeducation
http://www.fool.com/school.htm
http://sec.gov/investor/pubs/assetallocation.htm
http://www.diehards.org/readsites.htm
http://finance.yahoo.com/education/begin_investing
http://finance.yahoo.com/funds/basics

Asset Allocation Calculators
(Determining how much to put in stocks and how much into bonds and money markets is a personal decision depending on your financial status. These Asset Allocation questionaires give you a rough idea how to do this. I like Vanguard best, but try some of the other sites as well.)
https://personal.vanguard.com/VGApp/hnw/FundsInvQuestionnaire?cbdInitTransUrl=https%3A//flagship.vanguard.com/VGApp/hnw/planningeducation/education
https://ais2.tiaa-cref.org/cgi-bin/WebObjects.exe/DTAssetAlcEval
http://www.ifa.com/SurveyNET/index.aspx

Web forum: http://www.diehards.org/
(Many investment web forums are overrun by scam artists. This one seems the most legitimate site.)
References :