Bond losses may offer investors a tax break. Here’s how

Here's a question many investors are asking. Why is the conservative part of my portfolio down? I'm Sharon Epperson and I help people make sense of how financial news affects their lives. For many investors, the answer starts with the bond market. Bonds can provide income and help balance a stock portfolio, but when interest rates and bond yields rise, bond prices generally fall. Why? New bonds may offer higher yields. That makes older bonds paying lower rates less attractive. So, their market value drops. And that means investors who bought individual bonds, bond mutual funds, or ETFs when yields were lower may now see unrealized losses in a taxable investment account. Those losses are only realized if you sell. And for some investors, that could create a tax planning opportunity. It's known as tax loss harvesting. And here's how it works. Identify investments in your taxable brokerage account that are worth less than you paid for them. Sell the investment to realize the loss. Use that capital loss to offset capital gains elsewhere in your taxable accounts and potentially reduce your tax bill. Then, reinvest the proceeds in an investment that still fits with your strategy. But, you want to be careful. To avoid the IRS wash sale rule, don't buy the same or substantially identical investment within 30 days before or after the sale. And don't sell just for a tax break. Still, higher yields and bond losses can be a good reason to reassess your portfolio, rebalance if needed, and check in with a tax or financial professional. For more personal finance tips, sign up for my Money 101 newsletter at cnbc.com/money101.