Exploring Fractional Ownership of Racehorses

Excited by the thrill of investing in racehorses but aren’t ready to pay the hundreds of thousands it costs to buy one? While the rewards might not be as potentially sweet, there is an alternative that is more cost-friendly and less risky: buying a fractional share of a racehorse.

First, Why Wouldn’t I Want to Invest in a Whole Racehorse?

Being able to say you own a racehorse may bring you prestige, but it’s an expensive and risky investment. You can pay anywhere from $150,000 to several million dollars for a racehorse, as well as ongoing maintenance fees, without a guarantee of a return on your investment.

If you aren’t well-versed in racehorses, you could buy a horse that never wins a single race. If you’re looking for a more assured investment, there are other ways to get a return.

What’s the Alternative?

I’m glad you asked. The idea of buying micro-shares in something is far from new (they’re even doing it with wine), but now, fractional ownership has reached the horse racing industry. Smart people figured out that while there are many horse racing fans in the world, only some of them can afford to buy a racehorse. So, they've developed apps allowing anyone to buy a fraction of a racehorse at a low price, with the app MyRacehorse being the app that’s taken the lead.

Using the app, anyone can invest in a racehorse for as little as $100, giving you a 0.01% stake in a horse. If the horse wins, you’ll share the profits with the other owners. You can keep up with your thoroughbred through the app, and MyRacehorse provides other perks to members, including race day privileges, behind-the-scenes content, insights from your trainer, and exclusive events. You can even visit your horse at the racetrack!

MyRacehorse is far from the only option for fractional ownership. Stride Racing offers cost and profit-sharing groups they call “Syndicates,” and the Pennsylvania Horse Racing Association has several ownership groups. You might prefer to go into fractional ownership with people you know at a local race track so you can be more involved with your investment and visit the track regularly. 

Pros of Fractional Racehorse Investments

The most significant benefit of this alternative to buying an entire horse is the lower barrier to entry. You don’t need a million to buy a horse; whatever your budget, you can get a stake in a thoroughbred.

You don’t have to invest in just one horse. Like  the stock market, you can invest in multiple horses to spread out your investment and risk.

Another benefit? You don’t have to cover costs for the upkeep and maintenance of a horse with fractional ownership. And you can profit from any horse breeding or sale based on the fraction you own. 

Cons to Fractional Racehorse Investment

As with full racehorse ownership, there is no guarantee of a return on your investment in the horse racing world. The risks are very high in this industry, so if you choose to invest, it may be better to look at it as a way to get involved in a sport you love more than investing to make millions.

If you’re involved with a local ownership group, you may have high maintenance fees on an ongoing basis. Along with that, racehorses are prone to injuries that can require costly care or even keep them permanently out of the game. If your horse gets hurt, your investment is gone. 

Like stocks, the Securities and Exchange Commission (SEC) regulates shares of racehorses. Right now, the market isn’t big enough for you to sell your shares if you’re having cash flow issues and want out. You are required to hold your fractional racehorse shares for at least one year, and you’ll get your money out when the horse is finished racing.

Any Other Options to Know About?

Just one more thing to consider before we reach the finish line. An interesting alternative has popped up digitally. Digital horse racing platforms like Zed Run allow you to compete in live events using NFT (non-fungible token) virtual horses. But wait, there's more! Not only can you run your horse in a simulated race, but you can also breed your horse to earn money. Then, you can sell your horses for cryptocurrency, ranging from under $50 to more than a million.

Currently, the marketplace volume is over $158 million, with more than $60 million won.

Are Fractional Racehorses Worth the Investment?

If you’re considering buying a fraction of a racehorse, understand  that this is a high-risk investment. While, yes, people do win up to millions of dollars in the horse racing industry, these wins are few and far between and certainly not guaranteed.

While there’s one winner in a race, there are plenty of losers. And horses get injured all the time. These are factors beyond your control, and they will impact your investment.

On the other hand, if you’re simply looking for a way to get more involved in a sport you love, investing in fractional racehorse ownership could be a way for you to feel connected, especially with behind-the-scenes and VIP perks.

How to Minimize Your Risk

Truly, the only way to eliminate risk with any investment is not to invest. But if you’re considering fractional racehorse ownership, do your homework. Understand what makes for a winning horse. Study a horse’s pedigree before investing. And look for reputable companies who have a history of producing winning racehorses.

Go into racehorse investing with a willingness to lose your entire investment. Then, if you win, so much the better. Experienced investors know that they should only invest what they can afford to lose.

If you like the idea of investing in racehorses but don’t have the deep pockets to buy a whole horse, consider fractional racehorse investing as a way to go deeper into this fascinating sport.