What is a market index and how might it affect your investments?

Investors who pay attention to the finance segment of the daily news may be aware that in late July 2019 the Australian All Ordinaries Index finally returned to the height it enjoyed before the Global Financial Crisis, but in the ensuing two weeks it experienced some volatility, losing around 1.7% of its value. Similarly, in January 2020, the All Ordinaries broke through the 7,000 barrier for the first time but had slipped back by around 2.8% in late February due to the economic effects of the Coronavirus outbreak. What is a market index and how might it affect your investments?