(FORTUNE Magazine) – When Sally Ganz and her husband, Victor, plunked down $7,000 for a canvas called Dream back in 1941, they knew it was a good buy. The artist was an acknowledged master, and the painting, a portrait of his sleeping mistress, looked to be as strong as any Picasso had done in his already formidable career. What no one could have guessed was exactly how good an investment it would turn out to be. Last year the painting sold for $48.4 million.

Obviously, the chance to ride the career of a Picasso comes around no more than once a century. Still, the Ganzes' tale captures the secret dream of anyone who has ever contemplated collecting the works of a contemporary artist: to see a talent you "supported" go on to become a giant. Your taste in art is spectacularly vindicated, and your monetary investment goes through the roof.

But to enjoy even a shadow of the Ganzes' success as a collector, you are going to need help. Contemporary art may represent the most affordable point of entry to the world of serious collecting, but even so it's not cheap. Prices can start at $1,500 for a small drawing by an artist like Wes Mills, who had his first one-man show recently, and run up to about $200,000 and more for the works of acknowledged stars such as Kiki Smith and Julian Schnabel. To buy pieces by artists with any kind of recognition, you could easily pay as much for a painting as for a car. You'd better be prepared to do your homework, and don't be afraid to seek out good advice. Says Eli Broad, art collector and CEO of financial giant SunAmerica: "Collecting definitely requires a bigger investment of time and effort than of money." Broad got started buying old masters, then switched to contemporary art, and now his personal collection comprises more than 300 works (plus another 600 in his art foundation).

So how do you get going? The collectors we spoke to all say the first stop should be galleries in the country's two major art centers, New York City and Los Angeles. A good gallery rep is a bit like a refined version of a real estate broker: it's the rep's job to find out what you like and to patiently introduce you to works that might click with your sensibility. Dick Cooper, art collector and founder of a privately owned investment fund, says galleries were a key part of his education. "The important thing at first is to get educated, to do the leg work," he says. "Just going around browsing has been a big part of this for me." His collection now includes works by such established figures as Schnabel and Anselm Kiefer as well as more recent marquee names like Damien Hirst.

Still, never forget that the gallery is in the business of selling you merchandise. You need unbiased sources of information too. UPN Network CEO Dean Valentine, who collects works by multimedia artist Gabriel Orozco and painter John Currin, among others, got his start by reading Janson's History of Art, the standard art history survey text, and subscribing to art journals. Since collecting contemporary art almost always involves buying work before it has hit the history books, journals like Artforum, Art in America, the London-based Frieze, and the Swiss English-language quarterly Parkett are often the only sources of information. Two widely respected contemporary-art critics are Christopher Knight of the Los Angeles Times and the Village Voice's Peter Schjeldahl, and the books of their collected essays make excellent crib notes for neophyte art patrons.

If you plan to sink more than $100,000 or so into your collection, however, books may not be enough. You should consider hiring an art consultant, who can advise you on the selection of pieces that make the most sense both aesthetically and as an investment, and then handle much of the detail work, including appraisal, framing, conservation, lighting, and insurance. Because there is no central association of advisers, the best way to find one is recommendations from fellow collectors or dealers. Consultants typically charge 10% of the price of a painting.

That's not cheap, to be sure, but a good consultant can more than make up for the fee by keeping you from overpaying. Art market pricing, after all, is not designed to make things easy on newcomers. Gallery prices, for example, are always just the opening bid in a negotiation. You can expect them to be at least 10% above fair market value. Remember, too, that the market for contemporary art can get highly emotional. In the 1980s speculators inflated the price of canvases by relative newcomers like Sandro Chia and Francesco Clemente into the high six figures. When the bubble burst in 1991, few buyers could be found at any price. A level-headed consultant could have kept you out of the buying frenzy.

A less costly way of acquiring market intelligence is to join a collectors' group at a local museum. Membership fees range from as little as $250 to several thousand dollars. "Joining these groups is a good way to meet other collectors," says New York gallery owner Matthew Marks. "They can tell you which critics to pay attention to, the good dealers, the good auction houses, and other kinds of inside information."

Pick a group associated with a museum or exhibition space that displays the kinds of work that interest you. If your tastes run toward more established names, you will probably prefer meeting collectors at the Museum of Modern Art, or for more up-and-coming artists, the Whitney in New York, the Museum of Contemporary Art in Chicago, or the Los Angeles Museum of Contemporary Art. For collectors who are more interested in lower-ticket emerging artists, Jeanne Greenberg, head of a New York-based art advisory service, suggests White Columns, Exit Art, the Drawing Center, or P.S. 1 in New York, or SITE Santa Fe in New Mexico. If you prefer an international flavor, she recommends the Guggenheim, which has branches in Italy and Spain, among other places.

When you finally get ready to put some money where your aesthetics are, keep your focus on just a few artists. If you have limited time to invest, it's easier to become an expert in a relatively small field. And buy the best pieces you can afford. If your artist's career does take off, the major works will appreciate faster than smaller, cheaper ones. Don't be afraid of harsh or difficult subject matter. Strange as it may seem, Monet's Water lilies struck contemporary viewers as tough and unpleasant. Finally, if you're not absolutely in love with it, don't buy it. Canvases are not stocks; you can't unload one you've soured on in an afternoon.

If all this makes collecting sound a lot like work, remember why you're doing it. Yes, you need to be prudent to protect your investment. But collecting can pay off in unexpected ways. "It's an intellectual pursuit rather than an acquisitive one," says Valentine. Adds fund manager Cooper: "I don't have any windows in my office, but I think that the art that I have on the walls has given me a window on the world that's better than any view."

REPORTER ASSOCIATE Rajiv M. Rao