How Muslims can use compound Interest? Islamic compounding ways

So you have read the importance of saving early and the power of compound interest many many times. However as a Muslim you cannot participate in anything involving interest. Also you realized that keeping money in terms of  cash diminishes its value due to  inflation etc.

 so you don't want to lose the magic of power of compounding as it is said:

 “Compound interest is the eighth wonder of the world" by Albert Einstein

 Lets understand why we can't use money for making money:

 Money in Islam is not a commodity. It serves only as a medium of exchange and measure of value  for other goods or services.

 When people can start charging interest on money, or making money out of money, then it defeats the purpose of money which is actually just a medium of exchange.

 The delay of payment can be recognized as part of the cost, and therefore the seller can increase the price accordingly if the parties agree to settle the payment on a future date because Islam recognizes the monetary valuation of time in a particular transaction.

 How Muslims can take benefit of compounding :

 Compounding is the process in which an asset’s earnings, from either capital gains or interest, are reinvested to generate additional earnings over time

Since interest is Haram, we will use the second option for compounding ie "Gains"

 1-Compounding using Dividend :

 Dividend investing, if done properly, can share many of the same benefits that compounding interest offers in certain investments. When you reinvest dividends back into the market, purchasing more shares with dividends earned, over time that wealth exponentially increases. Over the long-term you will earn more than if you were to just take dividend income and put it in your pockets.

 For example, if you were to invest $10,000 in a dividend stock that had an average annual return of 12% (a total of stock price appreciation plus dividend yield) and you reinvested the dividends; in 30 years that investment would result in $299,599.22.

 2-Compounding using Profits on Investment:

 The benefits of compound interest apply, more or less, to other non-fixed-interest investments. If you invest $1000 in a business and get a 10% rate of return, you have $1100 to invest in your next venture, which means it will be more profitable and so on. That's why the growth happens, not specifically because it is interest. Stocks do not pay interest, and the 'magic' applies to them too. The fact that you might lose as well as win complicates things, but doesn't change the principle. We can apply to any type of investment where the profits of the investment cause the investment to get large

3-Compounding using Mutual Funds:

 There are many sharia Compliant Mutual fund company automatically reinvest the cash you receive from dividends into the fund or do it on your own. Reinvesting dividends and is a better your chances of earning more if it is maintained for longer period

4-Using Real Estate for compounding:

Real estate compounding is similar to using dividends from a stock to buy more stock.

With real estate, you reinvest the profits from one property into additional rental properties.Here are the two ways you can use compounding for your benefit

Property Appreciation: Real estate properties tend to appreciate in value over time. The longer you hold a property, the more it can potentially increase in value. This capital appreciation forms the core of compounding in real estate.

Rental Income: Real estate investments often generate rental income. As property values and rental rates increase, your rental income grows. You can reinvest this income to purchase additional properties or pay down existing mortgages, compounding your investments further.