.The Russell 2000 may possess a profitability problem.Though the small-cap index got 10.1% in July, it's dropped approximately 4% so far in August, since Thursday morning.ALPS' Paul Baiocchi chalks up the unpredictable transfer to the mark's overall composition, with an estimate coming from Beauty Global presenting 40% of those companies possess bad earnings." [Investors] have actually primarily surrendered themselves to the truth that through being in the Russell 2000, I'm simply going to need to take the great along with the negative," the organization's main ETF schemer informed CNBC's "ETF Advantage" this week.To prevent the profitability burden, Baiocchi suggests capitalists prioritize top quality companies, taking a look at more particular exchange-traded funds like his firm's O'Shares U.S. Small-Cap Quality Reward ETF Allotments (OUSM)." The suggestion is actually high quality companies that spend and increase their dividends, and also significantly, possess a lot less dryness than their peers," he pointed out. "It allows specialists as well as clients that have actually seen little hats go sideways for five years to be assigned to a category that's delayed." In addition to its own success display, the fund has just 107 sells u00e2 $" a portion of what is actually inside the Russell 2000. Its top 3 holdings are Tradeweb Markets, Juniper Networks and Old Republic International, each sitting at a roughly 2% weighting in the fund, every FactSet.Shares of the small-cap fund are down 1.5% month to time u00e2 $" outmatching the Russell by more than 2 percentage points because time.Disclaimer.