Asset allocation plan for starting out

[kiora]

Me again - figured I should start a new thread

I have been reading (so many book suggestions to work my way through!) and learning a lot. Currently reading Martin Hawe's "Investment Guide" and finding it really useful.

Everything I've read so far talks about the importance of asset allocation and diversity within each allocation. All of which makes perfect sense to me - I understand it. However, I'm wondering how best to achieve this given my newbie status and the small amount of capital I currently have to invest. I don't believe I currently have enough cash assets to invest in debt assets (bonds or cash) and I clearly don't have enough to invest in property. Which leaves shares. Having dipped my toe in the water with my Kingfish purchase I now need to figure out what the next move should be. I've looked at putting a couple of grand into Term Deposits or Managed funds with either of my banks (ASB and RaboDirect) but I'm not convinced this is the way to go. Rabo has no dividend reinvestment funds so for me, that defeats the purpose. They also have a minimum deposit of $250 for a regular monthly investment which may be doable some months, but not every month.

I guess what I'm asking is - with a small amount of capital and a lower capacity for savings, is it viable for me to spread my investments across areas other than shares at this point in time? Am I better at this stage to drip feed what I can save, into a variety of shares (focus on solid companies with decent dividends and reinvestment plans) to build up a decent little portfolio - and just keep a couple of grand in the bank for emergencies? I realize this is kind of putting all my eggs in one basket but I'm just not sure how best to get out of the starting gates with my overall plan.

Right now I still have $6000 in the bank (after my share purchase) - How do I spread the risk with such a small amount of money?

It might seem that I've "got the bug" and now want to go buying shares all over the place. I really don't. I just want to come up with a basic plan for "where to from here" to keep the momentum up in terms of finally being proactive with my finances.

As usual any comments, suggestions, feedback gratefully received .

IMV Its often better to hone your skills at identifying higher return assets rather than diversifying too much.Remember you are starting to invest late in life.What is your goal?To get to retirement with no,reasonable or moderate savings.If your portfolio is too diversified it will often lower its return.
If you want to drip feed small amounts it may be better to drip feed into something like Milford Growth fund which is PIE(tax paid) until you have an amount that you can withdraw and are happy to invest say $5000 in a share that you have identified that will grow in value.Then build up another $5000 and invest in another one.

[justakiwi]

IMV Its often better to hone your skills at identifying higher return assets rather than diversifying too much.Remember you are starting to invest late in life.What is your goal?To get to retirement with no,reasonable or moderate savings.If your portfolio is too diversified it will often lower its return.
If you want to drip feed small amounts it may be better to drip feed into something like Milford Growth fund which is PIE(tax paid) until you have an amount that you can withdraw and are happy to invest say $5000 in a share that you have identified that will grow in value.Then build up another $5000 and invest in another one.

My most basic goal right now (the very least I hope to achieve) is a long term return on my savings that is better than leaving it in the bank. I would also hope to make sufficient growth over the next 10 years to end up with a solid investment to sit alongside my Kiwisaver when I retire. If my investment grew enough for me to dip into it down the track (prior to retirement) for something like a holiday in Rarotonga - that would be a bonus.

I'm realistic. I know I'm a very late starter and I know I'm not going to make bucket loads of money. I just can't sit here watching my savings languish at 3% interest any longer.

Thanks for the Milford Growth suggestion. I did have a quick look at that one and I'm definitely not ruling PIE funds out. I was thinking more of working towards accumulating $1000 at a time (then investing) though, as that's more realistic for my situation than waiting till I've saved $5000.