The tangibles market is turning up, but it's still tricky

A diamond in a vault gathers no interest. That is at least one proverb to ponder before investing in tangibles - items such as antiques, gold, coins, stamps, and art.

Now that prices for these items are on the way up and investing looks attractive once again, there are a few more adages to remember: Don't put all your savings in one rare coin; return on investment isn't built in a day; you can't switch tangibles in the middle of a slump.

Investing in tangibles is tricky. It's an investment that yields no interest, can have a high risk factor, and is not very liquid.

Because of these unique features, financial planners suggest that no more than 10 percent of a portfolio should be invested in tangibles. ''In many cases investment should be zero,'' says Kurt McCracken, manager of the executive financial counseling office at the Bank of America, in San Francisco.

Mr. McCracken explains it's important to take care of major financial needs before putting your money in collectibles. ''Because of high risk, it's something you get into when you have met your primary objectives'' - such as education for your children, insurance, a home, and car, he explains.

A person should expect to hold on to a collectible for the long term, at least three to five years, before making a return on it. ''People tend to buy works of art to hold for a generation,'' points out Hugh Hildesley, senior vice-president of Sotheby Parke Bernet Inc., an international art and antique auction house.

This is why money invested in collectibles should be money you can do without for a few years. And it's possible that a purchase may never make a return - the fad of that item may fade. ''What you pay today has no overall bearing on what you may get - you are paying for your taste,'' says Robert Skinner of Skinner Inc., a Boston-based auction house. Mr. Skinner strongly states that people who buy collectibles should buy items that interest them and which ''they spend a good part of their lives investigating.'' Investing in antiques and art for monetary return is ''absolutely wrong,'' he says.

Most tangibles are not very liquid - that is, they can't be turned into cash easily. It may take days, weeks, or months to unload a stamp. Selling your collectible can be even harder when prices are sliding dramatically - as they have been from 1980 until recently. Gold and silver, on the other hand, are more liquid than the other tangibles.

People unfamiliar with their area of investment - who aren't Americana buffs or don't really know what's so special about a 19th-century Liberty dollar - can be ''taken for a ride.''

''Authenticity problems, overpricing, deception in grade or quality - a person has to be very careful and very wary until he knows what he's doing,'' says John C. Porter, with the rare stamp and coin division of Newhard Cook & Co. , in St. Louis.

But despite these warnings, and despite a market where prices have been licking the dust for the last 21/2 years, dealers are saying the outlook for tangibles is good. Gold, stamp, coin, and antique dealers say the trend has been a gradual run-up in prices since about August.

Gold and silver prices have been volatile recently, but ''for every one step back, there have been two steps forward,'' says Jonathon Marcus, chief metals trader at the Boston office of Deak-Perera. ''I am fairly bullish, especially on the white metals,'' he adds.

Mr. Marcus says that, had someone invested in August, he would be ''ahead almost $100 per ounce in gold and doubled his money in silver.'' He likes the white metals, such as silver, palladium, and platinum, because they are gaining in industrial and high-tech use, while at the same time becoming more scarce. ''Within six months we expect these precious metals to really move,'' he says.

The reason for price improvement is mainly interest rates, Marcus believes. ''People anticipate a decrease in interest rates, so we are seeing increased investment here because people are not getting those high yields they used to.'' The metals cycle lasts two to three years, he says, and the price swing is now on its way up.

But prices have moved up irregularly, he explains, ''because of stock market trading and volatility in the oil market.'' Mr. Marcus cited the recent low for gold at around $390 an ounce, and the recent high at $445. This roller-coaster performance is his reason for pushing this point: ''Allow a three-year investment period for metals.''

Mr. McCracken, at the Bank of America, describes metals as ''an efficient-market operation.'' He calls metals the most liquid of all the tangibles. He suggests ''dollar averaging in'' - which means investing the same amount of money periodically over a set amount of time. ''This way you can protect yourself from volatility,'' he says.

Coins are also experiencing an upturn. ''We think this is the beginning of a new coin cycle - which roughly lasts from two to four years, until prices reach unnatural highs,'' says Paul Taglioni, director of acquisitions for the New England Rare Coin Galleries Inc. Usually it's high inflation that pushes people into this kind of investment, but with such low inflation these days, Mr. Taglioni says, the market upswing is being ''internally generated.'' He adds, however, that ''only when the general public gets back into coins - which hasn't happened yet - will we see a boom market.''

It's the same story for stamps, says Bruce Stone, president of Stamp Portfolios Inc., in Stamford, Conn. ''Prices have bottomed out and they are on the way back up,'' he is convinced. Mr. Stone says the better-quality 19th- and 20th-century United States stamps are up 8 to 15 percent since the beginning of the year. He calls stamps one of the most steady investments, because the collector base is not crawling with speculators. Over the last 10 years, he says , the average annual capital appreciation on stamps has been around 23 percent.

Last summer was the bottom for antique dealers, says Sotheby's Mr. Hildesley. ''Prices for the best things will continue to go up, prices of middle-quality items will remain steady. I am pretty convinced the market has turned around.'' People can get involved at any level, he says, ''and depending on what fields you pick, your enthusiasm and love, it's possible to still collect good items in an affordable economic range.''

No matter what kind of collecting piques your fancy, there are some basic rules to investing in collectibles that can't be overlooked. When it comes to stamps, gems, diamonds, etc., make sure you have a certificate from a reputable grading institution that describes grade and authenticity. Don't accept guarantees of a future return on your item. Learn about your item before you invest in it. You can read up on items by subscribing to magazines for that field, studying material from the major dealer associations, and reading books. Visit trade shows and just watch during your first few visits to an auction.