What does write down mean? To write down an asset is to reduce its value. For example, the economic recession a few years ago led to many banks writing down the value of their loans. This led to a fall in the prices of many bank stocks, at least temporarily. Write downs can also happen with intangible items like goodwill. Goodwill is an accounting entry that reflects the price that the company paid for its acquisitions, minus the value of assets, like buildings and equipment, as well as trademarks, that it received as part of the acquisition. The resulting value is the company's “value as a going concern, or goodwill. Goodwill acquired in an unwise acquisition can lose value overnight. When that happens, the company has to write it off against earnings. At worst, the company might have to write off most, if not all, of its goodwill. If that writeoff wipes out most of the company's shareholders' equity, and/or most of a year's earnings, it can devastate its share price. Write downs occur frequently in business mergers and acquisitions. That's why we keep a keen eye out for any potential write downs and stay out of stocks with a high risk of writing down their assets. At TSI Network we also recommend using our three-part Successful Investor strategy:

1. Invest mainly in well-established companies;
2. Spread your money out across most if not all of the five main economic sectors (Manufacturing & Industry; Resources & Commodities; Consumer; Finance; Utilities);
3. Downplay or avoid stocks in the broker/media limelight.

Most investors who successfully build wealth over the long term follow certain investing practices. Find out what they are in our FREE investing guide, The 10 Best Practices of Successful Investors.