.The Russell 2000 might have a profitability problem.Though the small-cap index obtained 10.1% in July, it's dropped approximately 4% up until now in August, since Thursday morning.ALPS' Paul Baiocchi chalks up the volatile transfer to the index's general composition, along with an estimation coming from Apollo Global presenting 40% of those firms have adverse revenues." [Entrepreneurs] have actually basically resigned on their own to the fact that through remaining in the Russell 2000, I'm merely going to have to take the great along with the bad," the company's chief ETF planner told CNBC's "ETF Edge" this week.To prevent the profitability pain, Baiocchi advises clients focus on quality firms, taking a look at even more selective exchange-traded funds including his company's ALPS O'Shares USA Small-Cap High Quality Reward ETF Shares (OUSM)." The concept is high quality business that spend and develop their rewards, and essentially, have a lot less volatility than their peers," he pointed out. "It permits advisors as well as investors that have actually found little limits go sidewards for 5 years to become assigned to a category that is actually dragged." Aside from its own success monitor, the fund consists of simply 107 inventories u00e2 $" a portion of what is actually inside the Russell 2000. Its own best 3 holdings are Tradeweb Markets, Juniper Networks and also Old Republic International, each sitting at an about 2% weighting in the fund, every FactSet.Shares of the small-cap fund are actually down 1.5% month to date u00e2 $" outshining the Russell by more than 2 percent aspects because time.Disclaimer.