I guess there are 4 reasons to hold cash. Regular cash flow management to cover lumpy expenses. Emergency fund. Cash held in portfolio waiting rebalancing or deployment. Cash held in portfolio as an asset class (unusual as it would more likely be in some term instrument). Only the first reason affects me. Maybe have 3-6 months of spending in cash ( unrestricted checking and savings accounts). Since it's so expensive to hold cash I am surprised people hold such large balances?
The "cost" of holding cash should be in perspective to the rest of your portfolio and your personal goals. You can't optimize each individual asset class for long term return (that would drive you to 100% equities), you have to look at the whole and the role of diversification across asset classes.
Holding bonds is "expensive" during rising interest rate periods.
Holding stocks is "expensive" at the start of bear markets.
If you hold cash as an asset class as part of your portfolio allocation, then it needs to be liquid and not credit sensitive or interest rate sensitive. Those are the benefits of the cash asset class - holding a short term bond instead defeats the purpose. You probably won't notice this until you precisely need those characteristics - when it's time to rebalance because bonds and stocks are hit.
Personally, I hold plenty of cash because I can "afford" to. I have plenty invested in other asset classes, more than enough to cover my long-term needs IMO according to careful research (and knocking on wood of course). Most of my cash has been gradually accumulating - the result of years of typically underspending withdrawals. I see no need to reinvest that excess back into equities and bonds as I'm not interested in increasing long-term return at the "cost" of reducing funds I have available to spend on whatever I like in the next few years. Just because I didn't spend the money last year doesn't mean I might not like to spend it next year. I don't want to outlive my assets, but I also have the important goal of not leaving too much on table when I pass.
Minimizing cash is a focus on long-term return. Which is fine. For some folks that is their goal - they have heirs, or prefer to have more $$ available when they are older, perhaps. Or maybe they have so much guaranteed income coming in that they simply don't need any cash reserves at all, so they prefer to pass along the bulk of their investments. But that doesn't mean it's the right goal for everyone.