For people holding small amount of coins, keeping it on an exchange (reputable one) might be the best option.

As much as people preach about self custody, which definitely is the best idea when holding your crypto, it sometimes doesn't make much sense for plankton holders. For someone that holds a very small amount of let's say ETH it does not make sense for that person to buy that small amount of ETH on an exchange, pay some exchange fees when buying it, and then to transact it to their wallet and incur a good amount of extra fees just to put it on their hot/cold wallet.

Also having it on cold wallet is the safest option, but someone who holds just few hundreds in crypto, it might actually be better spending that extra $200 of their disposable income into buying some crypto, rather than spending $200 on trezor wallet.

And as for hot wallets, they're safe, but funds might not always be the safest in them either, especially with more inexperienced crypto folkswho might just connect their wallet with 2 clicks of a mouse to a malicious dApp that might drain all their funds instantly, or if you hold your funds on a hot wallet like Atomic that got exploited like a month ago and thousands of users lost all their funds in there . I wouldn't be so sure in saying that having a part of it on let's say Coinbase with 2FA on is much more insecure than having it on some hot wallet. Might be a hot take not many on here will agree on here though.

But again, for big holders, it's a must to self custody, but this is more about people that only started investing into crypto, and simply haven't accumulated enough to warrant moving it from some reputable exchange.