How to create a diversified portfolio

The other day I was trying to create a diversified investment portfolio for my 401(k) account. And I was shocked to see how bad the existing allocation was. Back when the financial equivalent of self realization had not dawned on me, I had done a very naive allocation by just sprinkling the money into various investment options in different categories given to me. The categories that were given were as follows;

1. Short term fixed income
2. Fixed Income
3. Long term equity
4. Small and Medium cap equity
5. International Equity
6. Natural Resources

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