It's been a heady time for art lovers in London. The Frieze Art Fair which showcases the hottest acts in contemporary art has trumpeted strong sales at its event while the Affordable Art Fair in late October sold works worth £4.4m - the highest since the Fair began in 1999. Those with deeper pockets were catered for at Sotheby's October Evening Sale of Contemporary Art. It raised nearly £35m, more than three times the amount achieved in 2006. So, is art an investment that's worth looking at? Or do you need to know your Banksy from Bacon or Hockney from Hirst?

There are a number of ways into the market. If you feel confident enough you could buy on your own account from dealers or at fairs and auctions. Alternatively, seek out an independent person to assess the wisdom of a particular purchase. London-based Seymour Management advises on art for private and corporate clients. Managing director Spencer Ewen says that while art is seen as "quite a sexy investment", it's wise to buy good examples by lesser known people rather than chasing what everyone else is buying.

A load of Jackson Pollocks?

Trophy-hunting a big name will mean paying a premium for what is effectively a brand. Ewen has even stronger warnings for the unwary purchaser who seeks short-term gains and cannot afford to lose money, "The art market is so illiquid. If you are forced to sell anything at any time it is a dangerous game."

If you want a more hands-off approach then buying through a fund means the decisions on what to buy and when to sell are taken by experts. Contemporary art fund V22 plc began trading on the PLUS market last August. Investors have contributed from £1,000 to £100,000 to become shareholders in a collection of art work which will be held for around five years or less if the time is judged right to sell.

The first round of investment resulted in a collection valued at £250,000. V22 has now embarked on its second round of selections and acquisitions. Director Tara Cranswick says the fund allows "normal people" to become involved in an area of art which is the "most exciting" area to be in. She sees contemporary art as still evolving and the most accessible to collectors.

Under the fund's rules artists also become shareholders, giving them a stake in the future of their work and drawing on their knowledge of the marketplace for future acquisitions. Cranswick says it is difficult to predict what returns are possible but quotes one market tracker which estimates that the London contemporary art market has had an average annual rate of return of 22.3% over the last few years.

Art for art's sake or your wallet's sake? 

For those with more cash at their disposal, the Fine Art Fund was set up in 2000 by a former Christie's finance director, Philip Hoffman. At Christie's Hoffman saw how people could make "ten, twenty or thirty times" their money when they were prepared to hold art over a ten-year period. "If you understand what you are doing in the art market then there is a lot of money to be made." His series of private equity funds concentrate on different areas of art. Most of his investors put in around 250,000 but the biggest single contribution has been 10m!