Subject: Re: I am noodling on a major change to my portfolio.
When considering using equal weighted indexes, my concern is that many if not half of the S&P 500 never seem to appreciate over time.

I share your skepticism that a historical trend (outperformance of equal-weight indices) that has reversed over the past 20 years will inevitably revert any day now. It could, you never know, but it might be wise to wait for some indication it is actually happening before betting on it.

Markets are a complex system affected by many variables. They do change over time. There are still those who insist the average market multiple will revert to 15x and find themselves in the perma-bear camp, forever forecasting market crashes, because of this historical allegiance. Since those old truisms were established, technology and digitization have changed the economy in myriad ways difficult to translate into market forecasts. And here comes AI, another mega-change built on advanced computing. As the old saw goes, "It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so."

So most of my MSFT, GOOGL, and APPL will be exercised away. When I look at those stocks, I ask will I want to buy them back at current prices and my answer is no. So where do I deploy the cash?

Into cap-weighted index funds, as I understand your plan, which are dominated by the names you are selling, and other similar names currently trading at even higher multiples. In effect, you would be buying them back at current prices, along with a bunch of other stuff it sounds like you don't want to own.

Perhaps this isn't the best moment to set up your port for future generations. Years when the major indices are up double digits are generally not the best time to buy them from a value perspective, especially if the gains are based more on multiple expansion than earnings growth. Macro forecasts are hazardous, but we have yet to see the long tail effects of the fastest series of fed funds rate hikes in history. It seems quite possible it will provide better entry points in the next couple of years than are available now. In any case, there's always another bear market coming. We just don't know when. To be sitting on 15% cash in these circumstances doesn't seem crazy conservative to me.

Cash may be a poor long-term choice, but at present you can keep up with inflation (in the U.S.) and maybe earn a point or two of real return in short-term treasuries while observing Rule No. 1 and awaiting a better entry point. One thing we know for sure is your future returns in equities will depend upon the prices you pay. That never changes.