Currently, iOS 10 devices will not run against Xcode 7.3.1 (you will see
Could Not Find Developer Disk Image). If you have yet to update but have concerns about Swift 2.3 or Swift 3.0 version compatibility (especially with third-party libraries) with your existing code base, you should keep your Xcode 7 version by renaming the directory. Here are the basic steps:
Rename your Xcode.app to Xcode7.app:
sudo mv /Applications/Xcode.app /Applications/Xcode7.app
Download Xcode 8 from the app store. You need to upgrade your OS version to at least 10.11.5. There are two updates, which will likely take about 2 hours to download.
Run Xcode 8 once to install it.
Open the terminal and create a symbolic link from Xcode 8 Developer Disk Image 10.0 to Xcode 8 Developer Disk Image folder using this command:
sudo ln -s /Applications/Xcode.app/Contents/Developer/Platforms/iPhoneOS.platform/DeviceSupport/10.0 (14A345)/ /Applications/Xcode7.app/Contents/Developer/Platforms/iPhoneOS.platform/DeviceSupport/10.0
Xcode 8 has a backwards compatible Swift 2.3 version, but there are still some minor changes (i.e. first argument parameters labels) from the Swift 2.3 version supported in Xcode 7.3.1. There is a built-in converter tool can usually help handle most of these minor fixes, but if there are third-party library dependencies, you may need to first check what version it supports.
If you accidentally upgraded to Xcode 8 and wish to get to Xcode 7 that can run in parallel, you can follow similar steps:
sudo mv /Applications/Xcode.app /Applications/Xcode8.app
Reinstall the Xcode 7.3.1 image.