Since Warren Buffett bought Apple (NASDAQ:AAPL) shares dropped from around $23 to $242 in 2016. This represents a return of 952% excluding dividends.

Much of Buffett’s success comes from buying high-quality stocks at good prices. However, investors hoping for similar results often overlook a reason that I believe may be even more vital.

Holding

Charlie Munger – Buffett’s former right-hand man Berkshire Hathaway – it used to be said that investment profits do not come from buying or selling. They come from the farm.

An example of this is Apple’s investment in Berkshire. The stock has looked pricey on several occasions since 2016, but selling at any of those times would be a mistake.

For example, the stock price reached an all-time high of $124 in August 2020. However, an investor who sold then would have lost about half of the gains made by holding the stock today.

Similarly, the stock looked pricey in November 2020 when the price-to-earnings (P/E) ratio was 40. However, the share price has more than doubled since then, rewarding investors who didn’t sell.

There is a clear lesson here for investors. Even if a stock looks pricey, it still has a lot going for it if the underlying business can continue to grow.

This is why knowing how to avoid selling can be so vital to your overall ROI. Still, Buffett is aggressively reducing Berkshire’s stake in Apple this year.

When to sell?

Buffett’s holding on to Apple shares even when they looked pricey generated returns that would otherwise have been lost. However, this does not mean that selling is always a mistake.

For any company, it is possible that its shares will sell at a price higher than the value of its core business. And in such a situation, shareholders should think carefully.

Is this the case with Apple? That may be the case – the company is currently facing some grave issues and investors should consider them before deciding what to do.

One of them is the political environment. Tense relations between the US and China are a potential problem for the iPhone maker in terms of both its production base and customers.

Another is the United States Department of Justice, which won its prosecution case Alphabet being an illegal monopolist. This may impact the fees you pay to Apple to maintain this status.

These are reasons to consider selling, but the company’s services division continues to deliver robust growth. And that means investors need to be careful about the risk of selling too early.

Lesson for investors

Finding great investment opportunities isn’t uncomplicated, but it’s just one part of getting good returns from the stock market. The second part is to avoid selling them too early.

In the case of Apple, Buffett said in May that the decision to reduce Berkshire’s stake was for tax reasons. And I’m inclined to take it at face value instead of looking for a deeper meaning.

This means that I believe that investors considering selling should carefully consider the company’s growth prospects. And while the stock may look pricey, that alone isn’t a good enough reason.