Investing

The glamour, the thrills, the cash. Watching them, it's hard not to wonder whether you too could join the winner's circle.

But how much of it is luck and how much of it is a large amount of well-directed money invested in the right bloodlines?

The answer is a bit of both. And maybe "invested" isn't really the right word. An investment is putting money into something with the expectation of gain and some security that you will have a great chance of recouping the initial outlay.

On this basis, buying into a racehorse is probably more akin to punting than investing.

We often focus on the headline-grabbing winners and not the thousands of other horses that continually lose.

However, even with punting there are ways to tilt the odds in your favour. And, as with all money matters, that begins with being well informed.

While some horses are plucked from relative obscurity and trained to greatness, most winners come from good pedigree, with a champion somewhere along their bloodline.

Even the semen of champion stallions attracts a hefty price and the foals of great mares a healthy sum too. For casual investors, grabbing a bargain will probably lead to obscurity and a financial black hole.

But there are exceptions. Take heart from the story of Takeover Target (pictured), the great Aussie thoroughbred that won more than $6 million in prize money after being bought for just $1250 by former taxi driver Joe Janiak.

About $1000 is about what you're looking at as the bottom end of thoroughbred prices. The top end can be in the tens of millions of dollars. Like every asset, there is no guarantee that the purchase price will go up or even be maintained.

Just last week, mining magnate Nathan Tinkler sold some of his racehorses at the Magic Millions auction. Some that cost him $200,000-$300,000, sold for $7000-$20,000. But the purchase price is just the first of the costs associated with being part of the sport of kings.

Owning a horse for racing can cost about $3000 a month in training and maintenance fees, and about $600 a month when it's "spelling" on a farm.

Getting a proven trainer will cost more but will also improve the chances of success.

There's a reason the likes of Gai Waterhouse and Bart Cummings consistently feature in the winner's circle. Trainers play a big hand in a horse's fortunes. They charge a fee and can keep part of the winnings.

Spreading the risk by being part of a syndicate is a popular option. You can form your own syndicate with friends but there are also professional outfits that offer syndicate shares to the public. Either way, you'll need to be registered and licensed. The experts say syndication is definitely the best way to get involved, as it spreads the costs and risks of ownership among a group of owners. But as with any other business deal, make sure any syndication is drawn up correctly.

A less common way to get involved is to lease a racehorse. This way there is no up-front purchase cost. You cover the costs while the owner is entitled to a fee and a share of the prize money. At the end of the lease, the horse is returned to the owner.

It's still normal procedure that prize money be split with the jockey and trainer too. As a guide, the jockey might expect 5 per cent, the trainer 10 per cent, and the owners (and bills) share the balance.

And then there's the big win that every racehorse owner has, the main motivation for getting in on the action, the social return on your investment.

There are certainly some big players in the racing business, which some people see as a great networking opportunity.