The top 30 coins that Blanchard and Company has placed in the past year boast a value of almost $7 million. In contrast, the top 30 coins placed over the same period in 2006-07 — a robust period for rare coins before the 2008 financial crisis — were valued at just over $5.5 million. No longer fooled by paper assets, wealthy investors are looking for alternative investments. And while gold has been a great addition to investment portfolios, ultra-rare coins now offer a better investment opportunity.

The price of gold has increased by 180% since November 2006, and while rare coins have gained too, they have not kept up with gold — so far. This lag means there’s no better time to buy than now, and savvy investors are doing so, diversifying further within the gold market by adding ultra-rare coins to their portfolios.

Here’s the real investment magic of rare coins: Their price gains often lag behind those of gold, and that characteristic takes much of the guesswork out of investing in rare coins — serving as an early warning signal of impending bull markets and producing periodic windfall profits for knowledgeable investors. Rare coins tend to follow gold’s lead and eventually surpass bullion prices. Bull markets in rare coins have always occurred during or after periods of rising gold prices, and reliable, independent reports show that average annual returns on rare coins historically have been more than twice as great as the returns on gold bullion.

When gold soared above $850 in 1980, the prices of rare coins rose more than twice as much — and kept going up after the price of gold fell.

In 1987, when gold started a rally that took it back above $500, rare coins again lagged but then rocketed past gold, with the market for investment-grade rare coins going up several hundred percent even as the price of gold fell from $500 to $360.

As reflected in the following key-dates and rarities chart, rare coins have stabilized and are poised to rise as traditional investments lose their luster.

Look at the number of ultra-rare coins — each worth more than $150,000 — that Blanchard has placed in the past year versus those in 2006-07.. The data suggest that wealthy investors are allocating more of their investment dollars into an asset that has underperformed gold bullion but is poised eventually to outperform gold and other investments.

Once introduced to the advantages of rare coins, many of Blanchard and Company’s clients have become proficient at reaping big profits from their coins. Much of the new demand for ultra-rare coins is coming from wealthy baby-boomers, 80 million strong and now in their 50s and 60s.

Already the richest generation in history, they are scheduled to inherit about $225 billion each year over the next decade. The immensity of the boomers’ accumulated wealth is making diversification a prominent part of their financial plans. More and more of them have become collectors and are capitalizing on the numismatic expertise they’ve developed to make their coin collections a valuable, profitable part of their portfolio diversification.

Copyright © 2011 Blanchard and Company, Inc.