Shares listed on stock markets represent real companies. As the value and demand for these company shares increases so does their price. When an index is said to be trading up or down by a number of points, this relates to the total increase or decrease in the value of the company shares it includes.
Share prices reflect a company's earnings and the dividends it pays, which can be affected by different factors. Some are obvious, such as the impact of a rising oil price on airlines; or more open to conjecture, such as the impact of a new competitor entering the market, or new legislation.
If investors believe that a new piece of information will negatively affect a company's ability to generate profit, demand for the stock may weaken, which will in turn reduce the price. Sometimes, the information may not even be specific to one company - for example, if people believe the US economy is weakening, stock markets around the world can often fall collectively in response.
The FTSE is an independent company which calculates markets across a wide range of asset classes (equities, bonds, cash and property). It creates a benchmark which fund performance can be measured against.
The FTSE 100 Index measures the performance of shares in the 100 largest blue chip companies in the UK.
The FTSE All Share Index measures the performance of shares in 98-99% of all UK companies listed on the London Stock Exchange.
It's worth remembering that unless you have invested in a tracker fund, rises or falls in an index may not reflect the performance of your own investments, as some sectors may not be represented in the index. Check the performance of the fund for a true picture.
Please note that value of investments and income from them can go down as well as up, so you may not get back the amount you invest. Fidelity Personal Investing does not give personal recommendations. If you are unsure of the suitability of an investment you should speak to an adviser.
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