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By Naomi Caine

The art market is booming. Gustav Klimt's portrait of Adele Bloch-Bauer sold last month for £73m, to become the world's most expensive painting sold in a private sale. The artist now joins such well-known figures as Picasso, Monet and Van Gogh who can command the highest prices for their work.

Collectors don't just honour the dead. Living artists are also doing well in the art rush. David Hockney's The Splash recently fetched £2.9m - £1m more than his previous record set only a month earlier.

So what's going on - and, more importantly, how do you get a piece of the action? Demand is, of course, the big driver of prices. And there is plenty of demand for artworks. Many of the big buyers these days are from the burgeoning economies of Asia, the Middle East and Russia . Domestic demand is also high. Investors with cash to play with are trying to find alternatives to a shaky stock market and a rather precarious property market.

The surge in demand - and prices - is good news for people who collect art. English Sporting painting (especially work by James Loder and Thomas Weaver) is up nearly 90% in the decade to June 2005, according to the Art and Antiques index compiled by Hiscox, the insurer, and Art Market Research, a data company. Old Masters, like Turner, have also done well - prices have increased nearly 50%; contemporary art has risen by 55%.

The gains compare well with international stock markets over the same time period. The FTSE All World index has climbed 55% in sterling terms since June 1995. House prices, however, have soared about 200% over the past decade.

So art can make a good investment, but experts warn collectors not to expect too much too soon. Karl Schweizer, head of art banking at UBS, the private bank, says: "Investors in stocks and shares want to buy at the lowest price and sell at the highest. With art, it is more important that they love a painting or sculpture and get an emotional dividend from it."

It's as well to like the art you buy because it could be hanging on your wall for a very long time. It's not so easy to buy and sell art works as it is to trade shares because the market is pretty illiquid. It is also harder to value a work of art objectively. You can't go and analyse the balance sheet or test the product. Then there's fashion: art goes in and out of fashion jut like clothes – and prices can move up and down as quickly as hemlines.

Professor Michael Moses, an art economist at New York University , says: "It's better to have something you like and can live with for a few years, rather than something you don't like but just want as an investment."

The art market is also unregulated. You need to check the history of ownership and condition of a piece before you part with your money. It's also best always to deal with reputable galleries or dealers.

If you want some advice, there's a growing band of independent art advisers who can help you choose and manage a collection. Some, like Schweizer, work at private banks, or you can ask at a gallery. Many offer an advisory service as a sideline to their main business.

But you should do some of your own legwork, too. Train your eye by visiting art fairs and galleries. The student shows are also a good place for the novice collector to start. You can get quite a lot of information on the internet. Most galleries have a website.

Try also www.britart.com for some more affordable modern pieces by budding talents such as Lucie Bennett and Danny Green. Art Tactic (www.arttactic.com) is another useful source. There's lots of information about sale prices and hot tips for collectors.

If you are short of funds, the Arts Council is running a 0% loan scheme called Own Art. You can borrow up to £2,000 and pay no interest if you buy a work of art by a lesser-known artist. Visit the Arts Council for the details and participating galleries.

With any luck, you will pick the next Damien Hirst - but then watch out for a tax bill if you sell your artwork. You are liable for capital gains tax (CGT) on any profits from the sale of art above your annual CGT exemption of £8,800 this year. It's also due at your highest rate of income tax, so 40% for top-rate taxpayers. But there are ways to cut your tax bill. Nick Parnell advises on tax issues from the sale of art.

He says: "If you sell something privately for £6,000 or less, you don't have to pay any CGT. And if you are part of a couple, consider buying the work in the name of the person in the lower tax bracket."

Of course, there's no guarantee that prices will continue to rise. But at least your art will give you pleasure - and the chance to call yourself a collector. And that must be worth something.