Diversification is the most agreed-upon idea in investing and one of the most misunderstood. Ask most people whether their portfolio is diversified and they will count the number of funds they own. That is the wrong unit.
What it is actually for
Diversification does not raise your expected return. It reduces the chance that one bad outcome you could not have predicted decides your result. That is the whole job. You are not trying to own a bit of everything for its own sake, you are trying to make sure no single company, sector or country can hurt you badly enough to matter.
Which means the test is not how many holdings you have. It is what they have in common.
Where the overlap hides
Owning six funds feels careful. If four of them are global equity funds tracking similar indices, you own roughly the same few hundred large companies four times, at four sets of fees. The correlation between them will be close to one. You have added cost and complexity, not resilience.
The same trap catches people who add a US technology fund to a global tracker because technology has done well. A global index is already heavily weighted to the United States, and heavily weighted to a handful of very large technology companies inside it. Adding the sector fund does not diversify the position, it concentrates it.
"If you cannot say what each holding is protecting you against, it is probably protecting you against nothing."
The axes that actually spread risk
Genuine diversification runs along a small number of dimensions, and one broad fund covers most of them.
Across companies and sectors. A global tracker holds thousands of companies across every sector. This is the axis almost everyone has covered, often several times over.
Across countries. Home bias is the most common unforced error British investors make. The United Kingdom is a small share of global market value, and a portfolio concentrated in it is a bet on one economy and one currency.
Across asset classes. This is the axis people skip. Equities move together in a crisis, whichever country they are in. Bonds and cash are what stop a bad year from becoming a decision you regret, because they are what you spend from instead of selling shares at the bottom.
Across time. Investing monthly rather than in one lump means no single entry price decides the outcome. This matters more for your behaviour than for your return.
The grown-up version
For most people the honest answer is dull: one broad global equity fund, some bonds or cash sized to the money you might actually need, and nothing else. It covers companies, sectors, countries and asset classes in two or three holdings, at the lowest cost available, with nothing to monitor.
The reason it feels insufficient is that it looks like no effort. But effort is not the input that gets rewarded here. Fees are the input you control most directly, and every extra fund you add to feel diversified is another fee working against you for the entire time you hold it.
Before any of this, use the wrapper. An ISA shelters up to £20,000 a year from tax on growth and income, and a pension adds relief at your marginal rate on the way in. Which of those comes first is a separate question, and it depends on your rate now against your expected rate in retirement.