To assess the explanatory power of a trust-based explanation, we start by modeling the impact of trust on portfolio decisions. Not only does the model provide testable implications, but it also gives us a sense of the economic im- portance of this phenomenon. In the absence of any cost of participation, a low level of trust can explain why a large fraction of individuals do not invest in the stock market. In addition, the model shows that lack of trust amplifies the effect of costly participatio