Could the US launch a nuclear strike on Iran, to finally end the conflict? Very unlikely (I hope), yet the probability is not zero. For investors, this is what is known as a “tail risk” – a low probability event, although in this case, one with a very high and uncertain impact.

There are worrying parallels between today’s stand-off – between a military superpower and a smaller yet tenacious enemy that will likely fight to the last man, imposing huge costs on the superpower even if it eventually wins – and the one between the US and Japan back in 1945. I don’t need to spell out the terrible outcome.

Most of the time we don’t need to worry about tail risks. An asteroid could hit the earth but it’s very unlikely. So it would be wasteful to wake up each day thinking about it, or to strain your neck looking up at the sky – not least because you might suffer a higher probability disaster by being run over. However, it has happened before, so it would be foolish, as a society, to pay no attention to it at all.

So the questions with tail risks really are:

• If it happened, how severe would the impact be?

• Has anything made it more likely than before?

• How much should you spend in time, effort and money to prepare?

If the US went nuclear, it would be terrible. It is more likely than before if you listen to the rhetoric. And it’s worth some time, effort and money to prepare.

I can’t give you a blow-by-blow game theory-style explanation of what happens next, because I really don’t know. That’s the job of paid political and military analysts (and the best of them will freely admit they don’t really know, either).

But let’s take an educated guess: I suspect there may be strong demand for gold, uranium – and the US dollar (as perverse as that may seem). All in various ways reflecting investors rushing for safety.

Should we then hold 40% gold, 40% uranium and 20% US government bonds? No, because that would be the equivalent of giving yourself neck strain from looking out for asteroids.

Some people do this and make a name for themselves - because they bet big on a tail risk that transpired. Michael Burry was one of the subjects of the book, The Big Short, after building up a colossal short position on US housing through collateralised debt securities and other exotic derivatives before the 2008/09 Global Financial Crisis).

But the vast majority of investors who have a very strong hunch on a low probability event – and then bet their entire wealth on it – go bust.

Assessing and preparing for tail risks isn’t about threading the needle and making a generational call. For the sensible investor, it’s about making sure that, if the tail risk materialises, your wealth isn’t destroyed.