A reader writes: "I have my 401(k) divided across four Fidelity funds: Value, Balanced, Diversified International and Contra. Its management fees range..."

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Q: I have my 401(k) divided across four Fidelity funds: Value, Balanced, Diversified International and Contra. Its management fees range from .67 (Balanced) to .94 percent (Contra).

Based upon the above choices and management fees, would you recommend that I try your “Margarita Portfolio” approach? (A low-cost approach that includes one part total domestic stock index, one part international stock index and one part Treasury Inflation-Protected Securities, or TIPS.)

My thinking is that the above four funds give me good diversification and overall good returns annually.

— B.J., Dallas

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A: Don’t do a thing. You’ve got a hot hand. Or your plan sponsor has. Either way, your account is the exception that proves the rule — your fund managers are adding value while collecting reasonable fees.

Fidelity Contra, the best of your funds, is rated five stars by Morningstar. It has ranked in the top 5 percent, 15 percent, 1 percent, 3 percent and 2 percent of all domestic large-growth funds over the past 12 months, three years, five years, 10 years and 15 years, respectively.

At its worst, the past three years, it has returned 1.89 percent a year more than the S&P 500 and has done better than 85 percent of its competition.

Fidelity Balanced and Diversified International are also solid top-quartile funds, ranked five stars by Morningstar. The weakest fund in your portfolio is Fidelity Value, a four-star fund that has been in the bottom 50 percent of its peer group in six of the past 10 years.

Categorized as a mid-cap value fund, it has done better than the broader S&P 500 index over all time periods, largely due to the stock universe from which it selects.

Rather than thinking about indexing, you should start monitoring your funds on a regular basis so that you’ll know if any need to be replaced with another managed fund or an index fund.

There are several good tools for this. Sadly, few readers are in your position — and that’s why I write so much about index funds.

One good source is fundalarm.com/”>www.fundalarm.com, an independent Web site that tracks fund performance over different time periods and ranks poor performers as one-, two- or three-alarm funds.

When a fund has become a three-alarm fund, trailing its category index for three time periods, fundalarm.com publisher Roy Weitz says you should consider selling the fund.

Morningstar data on funds is available on its site, www.morningstar.com, and on MSN Moneycentral at http://moneycentral.msn.com/investor/home.asp

Questions about personal finance and investments may be sent to Scott Burns at The Dallas Morning News, P.O. Box 655237, Dallas, TX 75265; by fax at 214-977-8776; or by e-mail at scott@scottburns.com.

Questions of general interest will be answered in future columns.