Mutual funds that grow too big cannot continue to offer investors top returns. At some point, managers can't find enough good places to put incoming money while sticking to the strategy that produced high returns in the past.

Example: Fidelity Magellan, once a stellar performer, now lags its benchmark index.

Possible warning signs that a fund is too big: The fund is holding more cash than usuaL.. the average market capitalization of its holdings is increasing... it is buying share in a larger number of companies than it usually had in the past... its major holdings are the same as the top stocks in the S&P 500 Index, making the fund unlikely to do much better than the stock market.

Funds that still outperform despite their size: Fidelity Contrafund (FCNTX)... Vanguard Windsor II (VWNFX). . . Washington Mutual Investors/ A shares (A WSHX).

Rosanne Pane, CF A, director and mutual fund strategist, portfolio services, Standard & Poor's, New York City. www.sandp.com