Trust is important for people to invest in stocks. This posting illustrates the general relationship between trust and participation in the stock market.

The stock market involves much risk and uncertainty. Let's face it, the majority of people who invest in stocks (directly, through funds, or in a retirement plan) don't fully understand how the capital markets actually function. Thus, there needs to be some faith in the process. If you think there is a high chance of being cheated, like the three-card Monte games played on the street, you simply don't play. People who are generally more trusting are also more likely to invest in the market. Those people who are less trusting are less likely to invest in the market. Without trust, people won't invest in the stock market. This impacts participation in retirement programs at work and owning mutual funds, as well as direct ownership of stocks.

Three financial economists (Luigi Guiso, Paola Sapienza, and Luigi Zingales) studied the relationship between a lack of trust and limited participation in the stock market in 12 countries. Citizens of these countries were asked, "Generally speaking, would you say that most people can be trusted or that you have to be very careful in dealing with people?" The higher the portion of a country answering that people can be trusted indicates a more trusting culture. This is graphed with the stock market participation rate of wealthy people (top 25% in wealth):