.The Russell 2000 may possess a profitability problem.Though the small-cap index acquired 10.1% in July, it's fallen roughly 4% so far in August, as of Thursday morning.ALPS' Paul Baiocchi records the volatile transfer to the mark's total composition, with an estimate from Beauty Global presenting 40% of those companies possess negative incomes." [Capitalists] have actually generally surrendered on their own to the reality that through being in the Russell 2000, I am actually only mosting likely to must take the excellent along with the bad," the company's chief ETF schemer told CNBC's "ETF Upper hand" this week.To steer clear of the earnings drag, Baiocchi recommends financiers prioritize premium business, checking out even more discerning exchange-traded funds including his agency's O'Shares united state Small-Cap Quality Reward ETF Shares (OUSM)." The idea is actually quality firms that pay out and also grow their dividends, and also significantly, possess a lot less volatility than their peers," he said. "It allows advisors as well as clients who have actually seen small hats go sidewards for 5 years to become alloted to a category that is actually dragged." Aside from its own profitability monitor, the fund includes just 107 supplies u00e2 $" a portion of what is actually inside the Russell 2000. Its own top 3 holdings are Tradeweb Markets, Juniper Networks and Old Commonwealth International, each sitting at a roughly 2% weighting in the fund, per FactSet.Shares of the small-cap fund are down 1.5% month to day u00e2 $" outmatching the Russell through greater than 2 percent factors during that time.Disclaimer.