For a newbie in cryptocurrency (which I am), it was quite hard to understand the process of creating paper wallets for all your currencies. If you send them to the wrong address, you're screwed...
I can imagine people store their coins on exchanges, especially when you have made only a small investment. If it is a small amount, you probably want to take the risk. Also, using exchanges it is easier to have an overview of the performance of all your coins.
But personally I feel more secure storing my funds offline. You didn't mention it, but there is also the risk of getting hacked yourself instead of the exchange. I'm not sure what hackers are capable of, but there is always some information to find on your pc...