More then anything else your strategy is good for one reason: You are doing something. Many people you know might have "paralysis by analysis" and do nothing. In other words owning a 3 star MF is better then buying a new Tahoe. So good job there.
Can you make it a bit better? Eh sure. Many more questions come into play. What is your age, what are your goals, and are you looking for tax savings?
For example in one's company 401K the choices are limited so you might be happy to have a 3 star MF.
Another example is bonds. I am kind of an old guy, 48, but have very little invested in bonds. If you are under 30, I would have zero.
Also I would be a bit cautious about using one rating source as the be all and end all of my investments. Is the fund been good over the long haul and having a bad year? You might want to also insert some of your own analysis.
It also depends on how much money we are talking about here. Micheal's advice is spot on if you have a smallish portfolio. Stick it all in an S&P 500 fund and concentrate on getting more in there.