Yeah, this one's common. You're probably trying to change the gear while the drill is still spinning or the selector isn't fully engaged.
The fix is simple: you must let the drill come to a complete stop before moving the speed selector. Turn the tool off and wait a second. Then, make sure you push the selector slider all the way forward (away from chuck for position 1) or all the way back (toward the chuck for position 2). If it's stuck in the middle, you'll get grinding.
If that didn't work: There could be physical damage inside from forcing it. Stop using it. Have the tool serviced by a qualified repair person using only identical replacement parts. Never modify the gearbox yourself.
Heads up: That selector is for choosing between high speed/low torque (for small screws) and low speed/high torque (for big holes or screws). Picking the right one makes the job easier and saves the tool.