Wales international Bale was sold to Real Madrid for a world-record fee and Tottenham used the money from the deal to bring seven new players to White Hart Lane.
But after a stuttering start to the campaign Spurs decided to sack manager Andre Villas-Boas in December, with Sherwood replacing him on an 18-month contract, although he is now expected to step aside in the summer.
"We're taking out one of the best players in the world and replacing him with seven players who have never played in this competition before," Sherwood said.
"How on earth did people think we would be title challengers or even make the top four?
"If you don't know the game you could possibly think that they would all hit the floor running but it doesn't happen, they need time.
"This club will be better with those seven players next season - they'll have experience of the competition and they will improve from that."
Tottenham finished the season with 69 points, three less than last season's club-record total of 72 - but 10 behind fourth-placed Arsenal.
Spurs have come fourth only twice in the last 10 Premier League campaigns and Sherwood believes expectations last summer were far too high.
"It was hyped - the hype was ridiculous," Sherwood said. "We've qualified for the Champions League once - why have we got a divine right to qualify for the Champions League?
"Where we've finished in sixth is where we should be, it's where we are as a club.
"We all want to aspire to the top four and the title but we aren't getting there with what we've got.
"To remove a match winner like Gareth Bale out of that squad - we shouldn't have expected it after that."
'How on earth did people think we would be title challengers or even make the top four?' - yeah, it's nuts, isn't it. A couple of months ago some muppet at Spurs was saying, 'Our target is fourth place, it always has been. If we can get higher than that, great'. Sherwood should've had a word with him. What was him name? Oh, right, Tim Sherwood.- fictionalemu