Initial Coin Offerings or ICO is a way for a company to raise funds before the coin is released into the market. Developers release a portion of the total coins available as ICOs. Buying the coins while it is being offered through ICOs gives the buyer a chance to get ahead of the game.
The prices of the coins may shoot up quite a lot once it is released into the market and when it does, those who got it through ICOs stand to make a huge profit. But as the recent debacle in China proved, investors and regulatory authorities are often wary of ICOs. As with any product in the market, there are good ICOs which can make you rich and are a good long-term investment and there are others which are nothing but a sham.
When the ICOs are announced, it is essential to read the whitepaper carefully and understand exactly what they are offering. Some people use ICOs as just a means to make money fast even though they don't really have a good product. When the product has been released in the market and has been tested by other users, you get a better idea of what the product is and its reliability based on their feedback. Sometimes, the price of the coin shoots up soon after the release, but it reduces greatly once the hype has settled down.
This can lead to a great loss for investors who bought the coins at a greater price through ICOs. ICOs are unregulated and largely speculative. This can lead to a lot of bad products from people who want to cheat others and make money fast. When you buy the coins after they have been in the market for some time, this risk is avoided As with any investment, it is important to research well before investing.
Both methods of buying coins have their merits and demerits. If the coin is based on a really good product and has a great team behind it, ICOs can be the best way to invest. But if the whitepaper of the product appears shady or if it is unclear about what they offer, it is best to wait till after the coin has been released into the market before buying.