ASX exchange-traded funds (ETFs) are no longer a niche investment. They’ve become one of the fastest-growing parts of the Australian sharemarket.

Today, around two million Australians invest through ASX ETFs, attracted by their simplicity, low costs and ability to gain instant diversification without having to pick individual shares or hire an expensive fund manager.

And the momentum is only building. According to ASX data, ETF trading activity increased 26% during the last financial year, comfortably outpacing the broader sharemarket, where trading rose 22%.

So, what’s behind the surge, and are there any risks investors should keep in mind?

Why investors love ASX ETFs

The appeal of ASX ETFs is easy to understand. Instead of researching dozens of companies, investors can buy a single ETF and instantly gain exposure to hundreds of shares, bonds or other assets.

Some track the entire Australian sharemarket. Others focus on global shares, technology, healthcare, dividends or specific investment themes.

Fees also tend to be significantly lower than those charged by actively managed funds because most ETFs simply track an index rather than trying to outperform it.

For long-term investors, that combination of diversification, transparency and low costs has proven incredibly attractive.

Many ETFs also pay regular distributions, making them popular with income-focused investors and retirees.

Perhaps most importantly, they’re easy to buy. Investors can purchase ETFs through the ASX in exactly the same way they buy ordinary shares.

The market keeps getting bigger

It’s not just investor numbers that are climbing. The number of ETFs listed on the ASX has more than doubled over the past five years to 456 products. Last financial year alone saw another 72 ASX ETFs launched, according to ASX data.

Meanwhile, funds under management across Australia’s ETF industry have now surpassed $350 billion, highlighting just how quickly the sector has matured.

That’s good news for investors because it provides more choice than ever before. Whether someone wants exposure to Australian blue-chips, US technology giants, emerging markets or fixed income, there’s now likely to be an ASX ETF designed for that purpose.

More choice also means more risk

However, rapid growth brings its own challenges. As investor demand continues rising, fund managers are racing to launch new products targeting the latest investment trends.

Artificial intelligence has become the newest battleground.

Several ASX ETF providers have recently launched AI-focused funds that promise investors exposure to companies expected to benefit from the AI revolution. Examples include the Global X Artificial Intelligence ETF (ASX: GXAI), the Betashares Global Robotics and Artificial Intelligence ETF (ASX: RBTZ) and the VanEck Global Defence ETF (ASX: DFND), which also has meaningful exposure to AI-driven defence technologies.

While thematic ETFs can provide targeted exposure to exciting industries, they often carry higher risks than broad-market index funds. Many hold relatively concentrated portfolios, while others launch after a sector has already experienced a significant rally.

In other words, investors may end up buying into yesterday’s hottest trend rather than tomorrow’s biggest opportunity.

Foolish takeaway

The growth of ASX ETFs reflects a broader shift towards simple, low-cost investing. With two million Australians now using ETFs and more than $350 billion invested in the sector, they have become a mainstream way to build long-term wealth.

But as the number of available products continues to explode, investors should remember that not all ETFs are created equal. Choosing a diversified, well-constructed fund remains just as important as deciding to invest in an ETF in the first place.

The post ASX ETFs are booming. Should you join in? appeared first on The Motley Fool Australia.

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Motley Fool contributor Marc Van Dinther has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Yesterday, Adairs Ltd (ASX: ADH) shares fell 1.3% following a trading update.

The homewares and home furnishings retailer has now seen its share price fall by 18% for the year to date. 

This has reflected broader sector wide headwinds for consumer discretionary shares. The sector has been hit hard by high interest rates and inflation. 

What did the company announce?

As my colleague Aaron Teboneras reported yesterday, Adairs announced it expects FY26 group sales to land between $640 million and $641.5 million.

At the midpoint, this represents an increase of 3.7% on FY25.

However, group underlying EBIT is expected to come in between $53.5 million and $55.5 million. This would be down 1.3% on FY25.

This put a halt to the positive momentum it had felt over the past month. Subsequently, the team at Bell Potter has provided updated guidance on Adairs shares for the next 12 months. 

Here is the broker’s updated view. 

Slightly below expectations

Bell Potter said Adairs’ FY26 trading update was slightly below market expectations on revenue (around 1%).

The core Adairs brand was the standout performer. It delivered 3% sales growth from late February to June and stronger margins following product range improvements under the new management. This helped offset weaker performance at Focus on Furniture.

Mocka (an online furniture and homewares retailer owned by Adairs) performed largely as expected. Meanwhile, Focus on Furniture continued to face pressure from increased competition and its ongoing turnaround under new leadership.

Following the update, Bell Potter has lifted its assumptions for the core Adairs business but now expects Focus on Furniture to remain loss-making in the second half of FY26 and continue to weigh on earnings in coming years. 

The broker forecasts modest group growth of 2.6% in revenue and 1.8% in EBIT, supported by foreign exchange benefits in FY27 and healthy inventory levels. 

As a result, Bell Potter increased its FY26 NPAT forecast by 16%, while reducing FY27 and FY28 forecasts by 5% and 8%, respectively.

Minimal upside

Based on this guidance, Bell Potter slightly increased its target price on Adairs shares to $1.45 (previously $1.40). 

It retained its hold recommendation. 

Despite raising its target, it appears Adairs shares are trading close to fair value, after closing yesterday just above Bell Potter’s target price. 

With the positive customer response to the range curation efforts at Adairs continuing to play out from the CY25 peak to the 4Q26 seasonal period and appears to be maintained into FY27, we attribute successful management strategy. 

However, our views on the recovery timeline at FoF in a highly competitive near-term value furniture market sees us remaining cautious over the next 12 months considering the current transition phase at ADH.

The post Are Adairs shares a buy, hold or sell after their trading update? appeared first on The Motley Fool Australia.

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Motley Fool contributor Aaron Bell has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Adairs. The Motley Fool Australia has positions in and has recommended Adairs. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This ASX healthcare share has finally come back to earth.

4DMedical Ltd (ASX: 4DX) shares fell 7% to $4.10 during Wednesday’s session, extending a sharp pullback that has now left the stock about 46% below the record highs reached in April.

Before anyone panics, though, it’s worth zooming out. This ASX healthcare share is still up an astonishing 1,528% over the past 12 months. Yes, that’s more than fifteen-fold in a year.

But here’s the catch: 4DMedical isn’t a tiny speculative medical technology company anymore. With a market capitalisation of roughly $2.6 billion, investors are already betting on a business that becomes much, much larger.

So where does it go from here?

Solving a real problem

The story behind this ASX healthcare share isn’t just hype.

4DMedical has developed advanced respiratory imaging technology that shows how lungs actually function rather than simply what they look like.

Using proprietary software and artificial intelligence, its technology creates detailed functional images that can help doctors diagnose and monitor respiratory diseases far more effectively than traditional imaging.

That’s a powerful proposition in a world increasingly embracing AI-driven healthcare.

Company keeps expanding its opportunity

This ASX healthcare share hasn’t been sitting still. One of management’s biggest recent moves was acquiring Austrian imaging specialist Contextflow.

The deal immediately strengthened 4DMedical’s presence in Europe, added lung cancer screening capabilities and provided access to existing reimbursement pathways in Germany.

Management believes the acquisition expands its addressable market by around 50%. That’s no small upgrade. Instead of being an emerging Australian medical technology company, 4DMedical is steadily building the foundations of a global imaging business.

Major scalp in the US

The United States remains the biggest prize for this ASX healthcare share. Recently, the company signed a major agreement with SimonMed, one of America’s largest outpatient imaging providers with more than 170 imaging centres.

The partnership supports the rollout of 4DMedical’s CT:VQ lung imaging technology across a substantial healthcare network. Even more importantly, the company believes these initiatives could expand its US addressable market for CT:VQ to around US$3 billion.

If adoption continues gathering pace, that’s a very large runway.

Where to from here?

Success creates a funny problem. The better this ASX healthcare share performs, the higher the expectations become.

After last year’s extraordinary rally, investors are no longer rewarding exciting stories alone. They want evidence of growing revenue, expanding reimbursement coverage and increasing commercial adoption.

The Contextflow acquisition also needs to deliver on its promise.

Any slowdown in customer adoption or execution could trigger more volatility, particularly after such an enormous share price run.

The next chapter now depends less on headlines and more on execution. If 4DMedical continues converting clinical success into commercial wins, today’s speed bump could eventually look like just another pit stop on a much longer journey.

The post This red-hot ASX healthcare share hit a speed bump. What next? appeared first on The Motley Fool Australia.

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Motley Fool contributor Marc Van Dinther has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.