.The Russell 2000 may possess a profitability problem.Though the small-cap mark got 10.1% in July, it's fallen about 4% until now in August, as of Thursday morning.ALPS' Paul Baiocchi earns the unstable relocate to the index's overall arrangement, with a quote coming from Beauty Global showing 40% of those companies possess damaging earnings." [Investors] have actually primarily surrendered themselves to the truth that through remaining in the Russell 2000, I am actually only mosting likely to need to take the great with the poor," the company's principal ETF strategist said to CNBC's "ETF Advantage" this week.To steer clear of the productivity drag, Baiocchi advises investors focus on premium firms, considering more selective exchange-traded funds including his firm's O'Shares united state Small-Cap High Quality Reward ETF Reveals (OUSM)." The idea is actually top quality business that pay for and increase their dividends, as well as notably, have less volatility than their peers," he mentioned. "It permits advisors and also financiers who have actually viewed small caps go sidewards for 5 years to be assigned to a classification that's delayed." Aside from its own earnings monitor, the fund consists of merely 107 inventories u00e2 $" a fraction of what is actually inside the Russell 2000. Its own top 3 holdings are Tradeweb Markets, Juniper Networks and also Old Republic International, each sitting at an around 2% weighting in the fund, per FactSet.Shares of the small-cap fund are actually down 1.5% month to time u00e2 $" surpassing the Russell through much more than 2 percent points during that time.Disclaimer.