Every first Saturday in May, the world stops to watch the Kentucky Derby. It’s the peak of “Elite” racing — $5 million purses and horses worth more than the hangars that house them. But if you’re a trader looking for a lower-correlated asset to sit alongside your stocks and crypto, you don’t want to spend time dreaming about winning the Derby and the massive capital investment required to get there.
You want the Claiming Game.
While the Triple Crown races are great for fans of the sport, financially they are well beyond the reach of most investors. Instead, many look to the “Industrial” circuit at dozens of U.S. racetracks as a high-speed business. For the DIY investor, it’s not about running for the roses; it’s about the Front-Loaded Payback, the fastest way to turn a tax win into the potential for monthly cash flow.
Is there risk involved? Certainly, since this is investing, and the assets are less liquid than stocks and ETFs. But they are much more liquid than many popular alternative investments. And if you follow the stock market during earnings season (like right now), you realize that the value of a stock can fall 10%-20% or more overnight before you can do anything about it. So that’s some important perspective.
The $10,000 Portfolio: 5 Horses Nationwide
You don’t need a billionaire’s budget to play at the home of the Kentucky Derby or elsewhere in the sport of horse racing. In 2026, the true alternative to traditional investments is a Claiming Partnership.
For a $10,000 investment in a claiming partnership, you can secure a 5% stake in a stable of five “Blue-Collar” horses. Instead of betting everything on one star, you own five different assets that typically hit the track every 4 to 6 weeks. This is a tangible asset where owners are encouraged to visit their horses at the barn. It’s a level of access to the front-row action that a standard brokerage statement simply cannot provide.
One Big Beautiful Tax Break: The Front-Loaded Payback Cycle
Most alternative assets make you wait years to see your initial money again. Claiming horses work differently. Because of the One Big Beautiful Act (OBBBA) of 2025, racehorses have become one of the most tax-efficient tools in the code.
The OBBBA made 100% bonus depreciation permanent.
Owners can deduct 100% of the cost of a horse in the first year it is placed in service. Furthermore, if your 100% depreciation creates a paper loss that exceeds your current year’s income, you can now carry that excess forward indefinitely as a net operating loss (NOL) to offset up to 80% of your future winner’s circle checks.
If you meet the “material participation” requirements (typically by staying active through regular and substantial involvement in the stable’s business), those deductions can potentially offset your active income like salary or trading gains. However, even if you are not active, it counts as passive losses which can offset other passive income (like rental income) or be released when the partnership interest is disposed of.
Strategic Comparison: How the IRS Views Your Stable
| Feature | Active Ownership (Material Participation) | Passive Ownership (Portfolio Investor) |
| Primary Benefit | Offsets all forms of income (W2, 1099, Gains) | Offsets Passive Income (Rentals, Private Equity) |
| Depreciation | 100% Day 1 write-off against total tax bill | 100% Day 1 write-off against passive gains |
| Unused Losses | Carried forward as a Net Operating Loss (NOL) | Suspended and carried forward for passive income |
| The "Exit" Win | Standard capital gains/recapture rules | Losses released to offset income upon disposal |
Operational Payback Model: A Sample
The goal of the 5-horse portfolio is to have enough starts that the law of averages begins to work in your favor. Let’s look at the first six months of operating a 5-horse stable as a 5% owner.
| Stage | Milestone | Cash Impact | Total Outlay | Net Capital at Risk |
| Day 1 | Initial Investment | -$10,000 | $10,000 | $10,000 |
| Day 2 | 100% Tax Write-Off* | +$3,700 | $10,000 | $6,300 |
| Months 1-6 | Training & Maintenance | -$6,000 | $16,000 | $12,300 |
| Months 1-6 | Cumulative Earnings | +$7,750 | $16,000 | $4,550 |
Based on a 37% tax bracket and 5% share. Assumes “Material Participation” and five horses starting once every 6 weeks.
Asset Showdown: Where Does It Fit?
Don’t dump your ETFs or your crypto; instead, view claiming horses as a tool for diversification. When the stock market is choppy, the “Industrial” circuit at the track keeps moving.
| Feature | Real Estate | Private Equity | Claiming Horses |
| Tax Win | 27 Years | Zero (Locked) | Immediate |
| Income | Monthly | 5-7 Years | 4-6 Weeks |
| Exit | 60+ Days | Event-Based | 30-Day Cycle |
| Correlation | Mid-Level | Market Linked | Low/None |
The 30-Day Exit: Liquidity on Demand
The greatest risk in most alternative assets is being locked in. If you buy a rental property, you are stuck until you find a buyer. In a claiming partnership, your exit strategy is the Claiming Box. In claiming races, by definition, the horses racing are for sale.
The Bottom Line
The model of racehorse ownership introduced here is for the investor who values active turnover and transparency. In investing terms, you get a front-loaded tax shield, a monthly
“dividend” cycle, and an asset that performs independently of the stock and bond markets.
While others are waiting for 10-year exits, the claiming investor is cashing checks at the finish line. That’s why racehorse ownership is the “alternative to alternative investments.”
Rob Isbitts is a semi-retired fund manager and advisor. Find his investment research at ETFYourself.com. To copy-trade Rob’s portfolios, check out the new PiTrade app. His new blog on racehorse ownership as an alternative asset is at HorseClaiming.com.
On the date of publication, Rob Isbitts did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
More news from Barchart
- Why Claiming Horses Are the Fastest-Growing Alternative Investment of 2026
- S&P Futures Muted With Focus on Trump’s Davos Address and Corporate Earnings
- What This $2M Options Bet on Corporate Bonds is Saying About the 10-Year Yield Curve
- As the Greenland Crisis and Japanese Bond Fears Rattle the Market, Make This 1 Trade Now
