(MONEY Magazine) – Just as overzealous retailers have pushed the Christmas buying spree into November, some Wall Street watchers worry that the vaunted ''January effect'' may also get earlier every year. For some time, investors have marveled at this seasonal phenomenon -- the tendency of small-company stocks to post unusually large gains in the first month of the year. From 1974 to 1985, for example, firms whose capitalization was in the bottom 10% of New York Stock Exchange listings returned 14% on average in January, compared with less than 2% for companies in the top decile, reports Marc R. Reinganum of the University of Iowa. No one knows exactly why. The most popular explanation is that investors unload poorly performing small-cap stocks near the end of the year for tax losses. At the same time, money managers dump the same stocks to ''window dress'' their portfolios for the year-end report. This one-two selling punch drives the prices down temporarily until value-hungry buyers pounce in January. But cashing in is increasingly tricky. ''The January effect is becoming a December phenomenon,'' says David Warnock, executive vice president of T. Rowe Price New Horizons Fund, who notes that small-cap stocks began rallying in mid-December last year. Roger G. Ibbotson of Yale, co-author with Gary P. Brinson of Investment Markets (McGraw-Hill, $29.95), argues that ''the basic problem with the January effect is that it is now too well known.'' Add to that the ever-present danger that a January slump could hurt all stocks, and some investment counselors advise you to steer clear of any attempt to capitalize on these calendar vagaries. Still, investors willing to brave January's fickle winds have several options. Norman Fosback publishes a list of January-effect picks every December in his newsletter Market Logic (3471 N. Federal Hwy., Fort Lauderdale, Fla. 33306; $95 a year, one month free). Last year's selection of 22 depressed small-caps rose 16% on average from Dec. 18 through Jan. 15. The only problem with playing individual stocks, however, is that many of them are illiquid over-the-counter issues that are hard to buy and involve steep transaction costs. A more workable strategy may be to open an account with a no-load mutual fund family that includes a small-cap fund, offers telephone switching and imposes no penalties for short-term transfers of assets. Then you can make your play by moving into and out of the appropriate fund by phone. As for investors who wish to sell underperforming small-cap stocks before year-end -- thus causing, as opposed to profiting from, the January effect -- the best bet may be to get out before the rush. Says Robert A. Haugen of the University of California, co-author of The Incredible January Effect (Dow Jones-Irwin, $21.95): ''If you wait till late December, you could be selling into a down market.'' And if none of these strategies help you profit this year, the answer may be an even more radical move: ''Calendar reform,'' jokes Acorn Fund president Ralph Wanger. ''If we could have one more January per year, and perhaps one less October, we'd have it made.''