With the news of uncertainty about the state of financial market in terms of stability, and when it does hit the market hard, the banks facing the catastrophe will not allow withdrawal of cash from the individual and business accounts, will the holding of precious metal in the deposit of the trustworthy holder (mutual fund company or other) allow APY (annual percentage yield) in compound interest on precious metal and jewelry (lucrative gems & rare minerals) holding depending on the current market demand for precious metals (fine gold, silver, platinum, etc)? Or does compound interest apply only to paper currency in saving and investment?
It totally depends on the structure and investment options offered by the particular 401(k) plan.
compounding applies to anything of value that appreciates/depreciates over time. So yes, you could invest in the precious metal markets and achieve the compounding effect that you desire. That is you could if your 401k has a precious metal fund or you have access to one via an individually directed route. The one thing you can’t do is go out and buy some gold/silver/platinum yourself and hold it (as you alluded to in your trustworthy holder statement). The precious metal must be valued and traded on one of the exchanges or mutual fund markets.
Remember, the precious metal asset is no different then the actual stock certificate being held by a mutual fund. The NAV of the fund is dependent upon the relative value that society places on the funds holidngs whether it be gold or a piece of paper signifying ownership. When there is a desire for the asset it will appreciate…if there is continual appreciation over an extended period of measureable time then you have compounding.
It’s improbable that your 401k plan is going to offer something like that. Few people invest in precious metal funds, so your employer isn’t going to spend money to offer it. I’m not sure that they’re even allowed to offer direct purchases of precious metals.
You may be able to do it through an IRA and you can definitely do it through a taxable account. Check with some IRA providers and see if anyone offers a brokerage option that includes precious metals.
The bulk of your question is difficult to understand. (Try a little punctuation, please!) However, I think that you’re asking how returns work on precious metals as compared to savings accounts.
Precious metals do not pay interest and nothing is compounded. You buy them at the current market price and sell them at the market price in effect at the time of the sale. If the price has gone up when you sell, you’ve made a profit. If the price has gone down, you’ve lost money. Precious metal mutual funds usually invest in mining companies, not the actual metals. Returns work similarly except that you will likely have capital gains distributions and possibly dividends.
If you want compound interest, open a savings account or buy some CDs.
By the way, precious metals are speculative. If you need to ask how price appreciation works, you may want to think twice about buying these. They’re best suited for sophisticated investors with risk capital.